U.S. ECONOMICS: Philadelphia Fed President Charles Plosser Addresses Fed Transparency Issues

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In order to remove the discretion used in the past to determine monetary policy, Philadelphia Fed President Charles Plosser said that the FOMC should use a systematic, or rule-like, behavior instead, specifically using the Taylor rule.

The Taylor rule is a reaction function that indicates how to set the policy rate as a function of deviations of inflation from the inflation target and some measure of economic slack.

According to Plosser, "systematic policies that provide important information about the policymakers' reaction function combined with other information, such as the policymakers' economic forecasts, can sharpen forward guidance in a way that reduces policy uncertainty and enhances economic performance."


More importantly "systematic monetary policymaking can enhance economic performance, and therefore [Plosser] favors clearer communication concerning the formulation of policy."

Plosser is voting member of the FOMC and remains one of the more hawkish members of the board.



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