In January, the Fed’s Federal Open Market Committee began releasing information on the underlying policy paths its voting members are forecasting.But in a speech released today, Philadelphia Fed Chairman Charles I. Plosser said the Fed can and should go even further in publishing the rationales for its decisions.
“Improving the transparency of our communications and strengthening our policy framework is a work in progress,” he said. “More can be done.”
Specifically, he’s interested in publishing a matrix of output, inflation, and unemployment, and the associated policy path assumptions of voting members.
He’s also interested in producing a quarterly inflation report, similar to the ones published in the U.K., or some other report that would clarify the relationship between Fed policy and economic conditions. And he wants more transparency on the systematic rules, like the Taylor rule, the Fed implicitly uses to guide its actions.
Finally, he expressed concern about attacks on the Fed’s independence. While failures on the fiscal side are partially to blame for these views, he also calls out bank bailouts and the Fed’s explicit support of the housing sector:
“Central banks have also contributed to the breakdown of the boundaries by engaging in credit allocations to particular sectors, such as housing, and bailouts to particular firms, such as Bear Sterns. Thus, the fiscal authorities and supposedly independent central banks have acted in ways that undermine central bank independence. I believe this is a dangerous path and one that needs to be changed. We need to restore the boundaries.”