Abstract: After a lengthy delay as inflation surged, the Federal Reserve has tightened policy assertively and forcefully reaffirmed its commitment to price stability. But public views about the Fed’s likely policy path over the medium term have fluctuated frequently in recent months, requiring repeated pushback from Fed officials. These misunderstandings about the Fed’s medium-term policy path reflect a significant gap in FOMC communication and could have been avoided. The Fed should routinely make reference to the implications of systematic monetary policy rules when publicly discussing the likely future path of interest rates. Without tying policy mechanically to any particular formula, they could point out that the prescriptions from such rules capture the historical evidence on how monetary policy has been conducted when it has successfully reduced inflation.

Read the paper: The Fed Should Talk About the Prescriptions of Systematic Policy Rules

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