Plosser (Philadelphia Fed): Communicating a Systematic Monetary Policy

Highlights from a recent speech:

  • President Plosser discusses how effective communications and a systematic, rule-like monetary policy lead to better economic outcomes.
  •  President Plosser believes the appropriate way to make policy systematic, or rule-like, is to base policy decisions on economic conditions. He thinks policymakers should describe the reaction function that determines how the current and future policy rates will be set depending on economic data. Monetary policy should be data dependent, not date dependent.
  •  President Plosser also believes the Fed should think of forward guidance as part of a systematic approach to decision-making and not an independent policy tool that attempts to bend expectations. As monetary policy becomes normalized, the Fed has the opportunity to ensure the public understands that forward guidance is an integrated part of a systematic approach to policy.

 

Available for download here.

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