• President Plosser highlights the relationship between systematic monetary policy and forward guidance. His goal is to help underscore how a systematic approach to monetary policy can improve the effectiveness of monetary policy in both normal times and in more unusual or extreme circumstances, such as when policy is constrained by the zero lower bound on nominal interest rates.
• President Plosser’s preference for dealing with forward guidance is for the FOMC to articulate a reaction function as best it can. This entails describing a systematic approach to policymaking, where policy decisions are based on available information in a consistent and predictable way.
• President Plosser believes the most recent FOMC statement took a step in this direction when it moved to a qualitative form of forward guidance by stating that the Committee will be assessing progress – both realized and expected – toward its policy objectives.
The speech is available for download here.