While policy rules have their merits, policymakers should not apply them “mechanically,” and committees offer benefits rules can’t, Federal Reserve Vice Chair Stanley Fischer said Friday.
“In particular, committees are an efficient means of aggregating a wide variety of information and perspectives,” Fischer told a Hoover Institution monetary policy conference, according to prepared text released by the Fed.
Two constancies are seen when comparing monetary policy decisions and monetary policy rules, he said. “First, actual monetary policy will sometimes appropriately depart from the prescriptions of benchmark rules even when those benchmarks describe past decisions well. Second, in their use of rules, policymakers will from time to time change their assessment of what rule they regard as the appropriate benchmark.”
While rules are based on “a single perspective on the economy, a committee offers “the pooling of multiple perspectives.” Although Federal Open Market Committee members share a goal, they bring different perspectives and views of the world.
