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Feditorial: Ducking Those Questions


William Poole
Wednesday, July 1, 1998

How does the Fed see the economy developing over the rest of the year?"

"What is the Fed likely to do?"

The Fed has a long-standing rule of not forecasting interest rates, but that doesn't stop people from asking Fed employees to do so. Implementing this rule is not always easy, especially when talking with knowledgeable and insistent reporters. I recently talked with one reporter who argued that it is my obligation as a member of a governmental policy board—the Federal Open Market Committee (FOMC)—to fully explain my thinking on current policy. Instead of refusing outright to accommodate such requests, I have so far tried to take a more positive approach by emphasizing the following argument.

The Fed's monetary policy is formed by blending together an amalgamation of views to form one view. At each meeting, we in the FOMC debate the current state of the economy, as well as our forecasts of the future, before voting on policy. Our collective judgment, conveyed to the markets, results in the clearest and most consistent policy possible, which contributes to the stability of the economy. Thus, a member of the FOMC who publicly conveys personal opinions about the future of monetary policy risks splintering this united analysis. While it is important for individual members to not confuse the markets by speaking freely about the Fed's possible actions, one thing that can be publicly stated is that every member of the FOMC shares a deep commitment to long-term low inflation.

As the new president of the St. Louis Fed, I am pleased to say that not all of my responsibilities require me to keep a shrewd poker face. This job provides me with ample opportunity to discuss openly a wide range of issues that affect bankers. If I haven't met you already, I look forward to doing so soon at one of the many District Dialogues and banking forums I will be attending in the next several months. I also will continue the Fed tradition of hosting breakfast meetings with business and community leaders throughout the Eighth District. As someone who is new not only to this job, but to this part of the country, I look forward to learning from bankers all that I can about our region. And, of course, I will be happy to answer your questions about the Fed's multifaceted role in determining the future of the economy. Well, perhaps not all of your questions...