Plosser Says Fed Needs to Communicate Better

The transcript discusses the Federal Reserve's anticipated rate rise and the challenges it faces in communicating its policy, particularly regarding its balance sheet strategy. It highlights the Fed's claim of being data-dependent, yet questions the clarity and consistency of this approach. The discussion also touches on how past communication errors have affected market trust and the divergence between market expectations and the Fed's stated intentions.

What is the main concern regarding the Federal Reserve's balance sheet as discussed in the first section?

• The balance sheet is shrinking too quickly.

• The size of the balance sheet is too small.

• The balance sheet is not providing enough accommodation.

• The lack of a clear plan for the balance sheet.

How does the speaker describe the Federal Reserve's data dependency?

• Focused only on inflation data.

• Strictly based on economic forecasts.

• Completely uninformative and opens the door to various actions.

• Highly systematic and transparent.

What has conditioned the market to be skeptical of the Federal Reserve's actions?

• The Fed's focus on long-term goals.

• The Fed's transparency in decision-making.

• The Fed's consistent adherence to its plans.

• The Fed's past U-turns and communication errors.

What is the impact of the Federal Reserve's communication challenges on market expectations?

• Market expectations are perfectly aligned with the Fed's intentions.

• Market expectations are higher than the Fed's predictions.

• Market expectations are lower than the Fed's predictions.

• Market expectations are unaffected by the Fed's communication.

What does the speaker suggest is necessary for the Federal Reserve to improve its policy communication?

• A more discretionary approach.

• A systematic way of being data dependent.

• Reducing the size of the balance sheet.

• Increasing interest rates rapidly.