Former US Federal Reserve chairman Alan Greenspan left the door slightly ajar. His successor, Ben Bernanke, wants to open it a bit more.
If investors, businesses and consumers have a better grasp of what the Fed is thinking about interest rates and the economy, they may be inclined to respond the way the central bank wants them to. And that can help the Fed do its job -- keeping the US economy and inflation on an even keel.
Bernanke, who took over the Fed in February from the famously opaque Greenspan, wants to improve the Fed's communications with Wall Street and Main Street. It's not clear at this point, though, exactly how he will go about doing so.
For investors, what Bernanke and the Fed says about the economy or other things can be just as important as its interest rate decisions. Wall Street dissects every word, and the market can turn on a simple phrase.
For the Fed, getting its message across can be a challenge.
A former economics professor, Bernanke came to the Fed with a reputation for plain speaking dating to his days as an academic. His communications since coming to the Fed have been anything but. The result: skittish investors have sent stocks on a roller-coaster ride.
Experts say it will take time for investors to get used to Bernanke and for Bernanke to sharpen his signaling system.
In the meantime, there are steps that the Fed itself can take to be more open and understood, experts say.
"Right now there is certainly a need for improvement and room for improvement," observes Anthony Sabino, a law professor and business expert at St. John's University.
"We demand transparency from private enterprise. Why does the central bank have to be so shrouded in mystery? They've got to do better," he said.
The Fed has begun a discussion of ways to improve communications. No decisions are imminent, although Fed watchers say a wide range of ideas are being explored.
A small committee is going to help the Fed "think through our entire range of communications, all aspects ... and try to develop a better, more explicit and more useful form of communication," Bernanke told Congress last month.
Some Fed watchers suggested that the central bank issue economic forecasts quarterly, rather than the current twice a year. Others recommended including more elements in the forecasts beyond the current projections for economic growth, unemployment and core inflation.
Another suggestion: revamping the policy statements released at each of the Fed's eight scheduled meetings a year on interest rates to do a better job of explaining the Fed's actions and laying out policymakers' thoughts on economic conditions and the future course of interest rates.
Fed policymakers need to proceed with caution. Too many changes too soon can backfire and muddle the message, some warn.
"The Fed needs to go one step at a time," advises Lyle Gramley, a former Fed board member.
Some economists suggested adding more details and context to the minutes that now come out three weeks after the Fed's closed-door meetings on interest rates. Last year, the Fed sped up the release of the minutes. Investors and economists applauded that move saying it provided them with more timely insights into policymakers' thoughts.
Bernanke believes the Fed's quest to be more open would be aided by numerically spelling out the acceptable bounds of inflation.
The central bank doesn't have a formal "inflation target" now, although Bernanke and other Fed members have suggested their current comfort zone is when "core" inflation -- excluding food and energy prices -- hovers in an annual range of 1 percent to 2 percent.
If investors, consumers and businesses feel confident the Fed will keep prices stable. Consequently, they may be less inclined to act in ways that could aggravate inflation, may worry less that inflation will affect their investments and paychecks and feel better about longer-term financial planning.
The government is aiming to recruit 1,096 foreign English teachers and teaching assistants this year, the Ministry of Education said yesterday. The foreign teachers would work closely with elementary and junior-high instructors to create and teach courses, ministry official Tsai Yi-ching (蔡宜靜) said. Together, they would create an immersive language environment, helping to motivate students while enhancing the skills of local teachers, she said. The ministry has since 2021 been recruiting foreign teachers through the Taiwan Foreign English Teacher Program, which offers placement, salary, housing and other benefits to eligible foreign teachers. Two centers serving northern and southern Taiwan assist in recruiting and training
WIDE NET: Health officials said they are considering all possibilities, such as bongkrekic acid, while the city mayor said they have not ruled out the possibility of a malicious act of poisoning Two people who dined at a restaurant in Taipei’s Far Eastern Department Store Xinyi A13 last week have died, while four are in intensive care, the Taipei Department of Health said yesterday. All of the outlets of Malaysian vegetarian restaurant franchise Polam Kopitiam have been ordered to close pending an investigation after 11 people became ill due to suspected food poisoning, city officials told a news conference in Taipei. The first fatality, a 39-year-old man who ate at the restaurant on Friday last week, died of kidney failure two days later at the city’s Mackay Memorial Hospital. A 66-year-old man who dined
EYE ON STRAIT: The US spending bill ‘doubles security cooperation funding for Taiwan,’ while also seeking to counter the influence of China US President Joe Biden on Saturday signed into law a US$1.2 trillion spending package that includes US$300 million in foreign military financing to Taiwan, as well as funding for Taipei-Washington cooperative projects. The US Congress early on Saturday overwhelmingly passed the Further Consolidated Appropriations Act 2024 to avoid a partial shutdown and fund the government through September for a fiscal year that began six months ago. Under the package, the Defense Appropriations Act would provide a US$27 billion increase from the previous fiscal year to fund “critical national defense efforts, including countering the PRC [People’s Republic of China],” according to a summary
‘CARRIER KILLERS’: The Tuo Chiang-class corvettes’ stealth capability means they have a radar cross-section as small as the size of a fishing boat, an analyst said President Tsai Ing-wen (蔡英文) yesterday presided over a ceremony at Yilan County’s Suao Harbor (蘇澳港), where the navy took delivery of two indigenous Tuo Chiang-class corvettes. The corvettes, An Chiang (安江) and Wan Chiang (萬江), along with the introduction of the coast guard’s third and fourth 4,000-tonne cutters earlier this month, are a testament to Taiwan’s shipbuilding capability and signify the nation’s resolve to defend democracy and freedom, Tsai said. The vessels are also the last two of six Tuo Chiang-class corvettes ordered from Lungteh Shipbuilding Co (龍德造船) by the navy, Tsai said. The first Tuo Chiang-class vessel delivered was Ta Chiang (塔江)