Mishkin called the report “really terrible” at the Oct. 24-25, 2006 meeting of the FOMC, according to transcripts. “It’s dull, it’s sex made boring,” he said. “The markets pay very little attention.”
The central banks of Canada, England and Norway are among those that issue regular reports aimed at updating the public on the outlook and risks to the economy. One of the most detailed is produced by Norway’s Norges Bank, which includes forecasts of the policy rate under different economic scenarios.
Many of these banks have a single goal of hitting an inflation target over time, unlike the Fed, which has a dual mandate to keep inflation low and stable and maximize employment. They also have policy-making committees that are smaller than the Fed’s 12-member FOMC, making it easier to achieve consensus on the route to that goal.
Fed policy makers in January declared a long-run inflation goal of 2 percent for the first time, a step in forging a consensus on steering policy toward a target.
The Federal Reserve Act is ambiguous on how soon the central bank needs to achieve its goals or how it should balance them. That’s left an opening for an array of opinions from Fed officials.
Describing how the committee plans to get to full employment and stable prices could be “very tricky from a governance standpoint” Mishkin said in an interview. That doesn’t mean the Fed shouldn’t try, he said, adding: “Committees have to make decisions.”
One example of how policy makers may emphasize one goal over another was Richmond Fed President Jeffrey Lacker’s dissent against the committee’s June decision to provide more stimulus. His statement following the meeting shows he puts more weight on inflation risks.
“Impediments to stronger growth appear to be beyond the capacity of monetary policy to offset,” Lacker said.
Chicago Fed President Charles Evans, by contrast, has stressed jobs. He has suggested that the committee refrain from raising rates until unemployment falls below 7 percent or inflation rises above 3 percent “over the medium term.”
Economists, including Bernanke, have long argued that central bank transparency improves public trust, and helps rid the economy of costly volatility arising from discretionary, unpredictable policies.
An agreement on how the FOMC would respond to the risks could go a long way toward making the Fed more transparent and its policies more effective, said Mark Gertler, a New York University economist and research co-author with Bernanke.
“We should not lose sight of the fact that the primary challenge for policy makers is to get the recovery going,” said Gertler. “A well-done inflation report could even be a bit helpful for this.”