Federal Open Market Committee communications have been "useful, but
incomplete," Federal Reserve Bank of Minneapolis Senior Vice President and Director of Research Sam Schulhofer-Wohl writes in its
Schulhofer-Wohl suggests the "most effective" communication would tell "not only what they intend to do, but what they intend to achieve-the destination as well as the path."
The Fed communications have focused on the "future course of interest rates and asset purchases."
It is equally important to "communicate clearly about the economic goals they aim to achieve - the destination" and when they expect the goals to be reached, Schulhofer-Wohl said.
"Of course, policymakers cannot perfectly forecast the future, so they cannot promise that a certain inflation rate or level of unemployment will be achieved in a particular year," he noted. "Nonetheless, they can say what they are trying to accomplish. If all goes according to plan, in what year do they intend to bring inflation back to the FOMC's 2 percent target? What labor market conditions do they expect will prevail at that time?"
