In nearly 40 years working for and helping lead the Federal Reserve, Cleveland Fed President Loretta Mester was part of a revolution that saw the U.S...
AMELIA ISLAND, Florida - In nearly 40 years working for and helping lead the Federal Reserve , Cleveland Fed President Loretta Mester was part of a revolution that saw the U.S. central bank offer ever more detailed and plentiful commentary on the economy and monetary policy .
Given how much is unknown, she said the Fed should build more of that uncertainty into how it talks about policy, focusing less on a baseline or "modal" outlook and more on a handful of the most likely outcomes - or scenarios - that would help the public better focus on how policymakers would react when the economy, as will inevitably happen, does something different than expected.
David Zervos, chief market strategist for Jefferies, argued, for example, that the Fed's use of bond-buying during the crisis might be one thing that blunted the eventual impact of monetary policy when rates started to rise because it imported onto the Fed's balance sheet losses that would otherwise have been borne by the public and driven down spending.
However, it also depends on how the economy is expected to evolve over time, and that calculation becomes complicated if things like productivity, the neutral rate of interest, or the likelihood and impact of supply shocks aren't either relatively stable or at least changing in familiar and somewhat predictable ways.
Better communication about how much the Fed doesn't know, she said, could help avoid that sort of mistake in the future by discussing, be it in each policy statement or in less frequent documents like the biannual monetary policy report to Congress, the most likely economic narratives and the "reaction function" Fed officials would use in response to them.
New pictures of the US Air Force's newest stealth bomber — the B-21 Raider — just dropped as flight testing continuesJERUSALEM — A group representing the families of hostages held in Gaza has released new video footage showing Hamas’ capture of five female Israeli soldiers near the Gaza border on Oct. 7. The video shows several of the young soldiers bloody and wounded. In one scene, a militant tells one of the terrified women she is beautiful.
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