Another related issue that could come up in the minutes is how Fed officials convey their intentions to the public.
Powell suffered a series of missteps that began in October when he said the Fed was “a long way” from a neutral rate, and then again in December when he described the balance sheet operation as being on “autopilot.”
Markets have recovered mostly from those issues, but Fed officials have been discussing how to improve communications, particularly if another crisis hits.
Bill English, a 20-year Fed veteran and current professor at the Yale School of Management, said officials have some other options available to them to give the public a more reliable road map for future intentions.
Among them are a “fan chart” for the possible directions of the fed funds rate, and information about the way policy could respond to changing economic conditions.
“More communication is better,” English said in an interview. “Things can be misunderstood and communication can go badly, but the response to that should be more communication and trying to clarify, and not communicating less. The world of a generation ago when the Fed didn’t communicate much about monetary policy at all isn’t actually a very desirable world for doing monetary policy.”
The fan chart would be similar to one the committee uses to know display the level of uncertainty around interest rate projections. The intent is to keep investors aware of how much difference there is in various forecasts and reinforce that the rate estimates are not carved in stone.
“One way or another it is just to suggest that while there is this path for the fed funds rate and the summary of economic projections, there’s a great deal of uncertainty around that path and the committee will adjust that path accordingly under changing circumstances,” English said. “That’s the point you’re trying to make.”
English said the current discussions around future policy responses could end up with a friendlier view toward negative nominal interest rates, as a recent Fed paper discussed, and quicker action to institute programs like QE.
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