financetom
Economy
financetom
/
Economy
/
Fed's Jefferson flags challenges on communications front
News World Market Environment Technology Personal Finance Politics Retail Business Economy Cryptocurrency Forex Stocks Market Commodities
Fed's Jefferson flags challenges on communications front
May 13, 2024 6:36 AM

(Reuters) - Federal Reserve Vice-chair Phillip Jefferson said Monday that while it is important for a central bank to communicate clearly with the public, there are times when those communications can get muddled.

"It's widely accepted" that clear communications enhances how effective central bank policies are "because clear communication can affect the expected path of interest rates and financial conditions more generally," Jefferson said in comments prepared for delivery before a conference held by the Federal Reserve Bank of Cleveland.

Jefferson did not comment on monetary policy or the economic outlook in his prepared remarks.

But sometimes attempts to communicate can have "unintended consequences," Jefferson noted.

The Fed's second-in-command pointed to two examples. "There is always a risk" that officials' comments about the future of the economy and monetary policy are "are interpreted by the public with a false sense of certainty" that can be mistaken for a fixed view on the outlook, Jefferson said.

"When that interpretation is proven wrong down the road, it can create more volatility and uncertainty than if there had been no announcement," Jefferson said.

The public comments of officials can also muddy the waters, he said.

"The diversity of viewpoints among policymakers lends itself to stimulating debates and, ultimately, better policy," Jefferson said, adding "but in such a situation, more communication could increase rather than reduce uncertainty about our policies."

Jefferson's take on central bank communications arrives as central bankers try to determine whether the sticky inflation seen over the start of the year will thwart their ability to deliver on forecasts from earlier in the year that penciled in three rate cuts for this year.

The quarterly Fed projections -- the next set will come at the June Federal Open Market Committee meeting -- are not an official forecast but merely a summation of the views of policy makers. However, many in markets do see them as a house view, and Fed officials are routinely asked to comment on those forecasts.

At the same time, Fed officials are frequent public speakers, and those speaking opportunities, which on some days can see multiple policy makers opining on the outlook, can leave market participants struggling to find a coherent take on what central bankers believe lies ahead.

A report last week from the Brookings Institution's Hutchins Center on Fiscal and Monetary Policy found academics and Fed watchers giving decent marks to the Fed for clear communications, although some aspects of that outreach, like the quarterly forecasts, was viewed with a more mixed take.

Comments
Welcome to financetom comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
Related Articles >
Zoomed Out | Balancing Trade and Climate Goals — these are the impacts of EU’s Carbon Border Adjustment Mechanism on India
Zoomed Out | Balancing Trade and Climate Goals — these are the impacts of EU’s Carbon Border Adjustment Mechanism on India
Nov 30, 2023
The EU’s Carbon Border Adjustment Mechanism is a significant development in the global effort to combat climate change. It has the potential to impact India’s trade dynamics and industries, with the aim of levelling the playing field in terms of carbon costs, observes SW India's Ankur Gupta and Samyak Jain.
India Q2 GDP preview: Growth seen at 7%, above RBI forecast
India Q2 GDP preview: Growth seen at 7%, above RBI forecast
Nov 30, 2023
According to the CNBC-TV18 poll, overall GDP is seen growing by 7.03% against a growth of 7.8% in the first quarter and 6.2% in the year-ago period, due to a weak base. Agriculture is expected to contribute a mere 2.7% to the overall growth, as opposed to 3.5% in the preceding quarter. 
UP tables supplementary demand of ₹28,760 crore
UP tables supplementary demand of ₹28,760 crore
Nov 29, 2023
The budget was presented in the legislative assembly by Finance Minister Suresh Khanna on the second day of the ongoing winter session. The finance minister said that of the supplementary budget, the expenditure on the revenue account is ₹19,046 crore and the capital account expenditure is ₹9,714 crore.
Saudi Arabia extends the term of its $3 billion deposit with Pakistan's central bank
Saudi Arabia extends the term of its $3 billion deposit with Pakistan's central bank
Nov 29, 2023
The agreement of the $3 billion deposit was initially signed through the Saudi Fund Development with the State Bank of Pakistan in the year 2021 and rolled over subsequently in 2022, after the issuance of the royal directives that reflect the continuation of the close relationship between the two brotherly countries, as reported by PTI.
Copyright 2023-2026 - www.financetom.com All Rights Reserved