his year's annual report highlights the need for greater synchronicity between the Federal Reserve and financial markets. By greater synchronicity, I mean a greater understanding of each other's expectations, interpretations and actions. The Fed has long had a large staff devoted to deepening its understanding of how markets are likely to respond to monetary policy actions, or lack thereof. Over time, the Fed has also increasingly recognized how important it is that the markets understand how monetary policy is conducted. After all, for the Fed to understand the market, the Fed must also understand the market's expectations about monetary policy. Clearly, both the market and the Fed have a problem if the market's expectations do not match the Fed's intentions.

All the attention to the stance of monetary policy is perfectly understandable: There's an awful lot of money at stake in today's financial marketplace. There is, therefore, an intense--and completely proper--public interest in correctly understanding the monetary policy-making process. And since the ones who know the most are the ones most directly involved in this process, policy-makers like myself often find people hanging on our every word. We policy-makers are the ones responsible for providing as much information as we can. In fact, what is at stake is more a matter of knowledge than of information. The public needs to understand how and why policy is made, and not just the specifics of particular policy actions.

While I'm all for the increased communication that greater synchronicity demands, there are limits to what FOMC members can say. Political accountability and economic efficiency require that the FOMC disclose as much as possible without damaging the integrity of the decision-making process upon which sound policy depends. If, for example, FOMC meetings were broadcast live on C-SPAN, the entire nature of the policy deliberations would be changed. Some critically important issues could not be discussed freely and openly, and others would not be raised at all. While the FOMC's deliberations can't be found on cable TV, they are available to the public in transcript form, with a lag of about five years.

The goal for us at the Fed is, I believe, to strike a balance--to communicate as much as we are able as clearly as we can without sacrificing the candor and completeness that policy-making discussions require. A daunting task, to be sure, but one that's worthy of our best attempt. This report is dedicated to that goal.