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.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique