The Fed's New Communication Strategy: Is It Stealth Inflation Targeting?

Along with the minutes of the October 30-31, 2007, meeting, the Federal Open Market Committee released a summary of its members' forecasts of key economic variables, a practice that is to be continued. Does this change in communication policy imply that the Fed is embarking on an undeclared policy of inflation targeting? Recent speeches by members of the FOMC indicate that the objective of releasing the forecasts is to enhance communication of policy concerns relating to its dual mandate of low inflation and low unemployment rather than set a specific target for inflation. This paper discusses the effectiveness of releasing forecasts in communicating the FOMC's policy to the public and its value as an internal discipline. It also proposes ways to include projections of policy interest rates in the forecasts while retaining flexibility to react to changing circumstances.Business Economics (2008) 43, 7–13; doi:10.2145/20080301