Federal Reserve Communications and the Road to Transparency

April 19, 2019

By: Spencer Krane, Senior Vice President and Senior Research Advisor; Daniel Sullivan, Executive Vice President and Director of Research, Federal Reserve Bank of Chicago

This is part of the Michael H. Moskow Honorary Paper Series, which also includes: 

Over the past 25 years, the Federal Reserve has radically transformed its communications strategies with the dual aims of increasing the public’s understanding of the institution’s work and informing expectations for the path of monetary policy. The transformation has involved an increase in the volume and changes in the type of communication with the public about the goals of monetary policy and the actions that the Federal Open Market Committee (FOMC) takes to achieve those goals.

In part, these changes reflect lessons from economic theory, which stress the importance of expectations of future policy for influencing the spending and saving decisions of households and businesses and the complications that uncertainty over the policy environment can present for the public’s decision making. These lessons highlight the importance of the Fed describing as clearly as possible the factors that will determine the future path of monetary policy.

In this paper, we provide a brief history of the changes in Fed communications and transparency — a process to which Michael Moskow made significant contributions, both at the system level and locally in the Seventh District, as president of the Federal Reserve Bank of Chicago. As president of the Chicago Fed, Michael served on a number of subcommittees of the FOMC that were charged with improving the Fed’s public communications about monetary policy and was an advocate of explaining the Fed’s policy rationale to the public.

Federal Reserve Communications and the Road to Transparency

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