Fed’s Mester highlights importance of clear communication with public

By Stephanie Kelly

NEW YORK (Reuters) – Cleveland Fed President Loretta Mester on Wednesday outlined ways that the U.S. central bank could improve its communications with the public, adding that clear communication plays a vital role in monetary policymaking.

In a speech at Rutgers University in New Jersey, Mester, who votes on the Fed’s monetary policy committee this year under a rotation, said clear communication can make monetary policy more effective by helping households and businesses make better economic decisions. She also said, in a prepared text of the speech, that the Fed has made “substantial” progress in that regard.

To strengthen communication, Mester suggested that the Federal Open Market Committee’s (FOMC) post-meeting statements should focus less on short-term changes in the data released between the committee’s meetings. Instead, the statements should concentrate on the accumulated changes in economic and financial conditions and their effect on the medium-run outlook, she said.

Mester also said the FOMC should use “simple” monetary policy rules as benchmarks to explain policy decisions.

“I am not advocating setting policy mechanically according to a simple policy rule; no rule works well enough across a variety of economic models and circumstances,” she said.

“However, using the rules as reference points and discussing why our policy may differ from these policy descriptions could go some way in helping to explain our own policy reaction function to the public.”

Mester added that another way to improve communication would be to link variables in the FOMC’s Summary of Economic Projections.

Mester’s speech comes on the same day that the Fed said in its Beige Book report the U.S. economy and inflation expanded at a modest-to-moderate pace from late November through the end of 2017, while wages continued to push higher.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.