Key Points
No wonder concerns are rising about the risk posed by over-communication to the well-functioning of financial markets, efficiency of the economys resource allocation and overall stability of the global system..
In 2011, then-Chair Ben Bernanke initiated press conferences after statements issued at the end of Federal Open Market Committee meetings..
Lacking a strategic anchor and an operational monetary policy framework, the Fed has become excessively data dependent, with officials often pushed to comment right away on inherently volatile data releases in a manner that over-extrapolates their content..
It is also about being more attuned to the potential market impact of what is saidespecially on signals from noisy data releases that can easily be negated by new numbersso as to strategically anchor Fed views, and being attentive to consistency of messaging..
Finally, America needs to improve the communication set-up that matters most for the accountability of monetary policy the one involving the semi-annual questioning of the Fed chair by Congressional committees..
