Goolsbee Says Fed Could Better Convey How It Responds to Economy

(Bloomberg) — Federal Reserve Bank of Chicago President Austan Goolsbee said policymakers should consider ways to improve how they communicate their views on economic conditions and how those feed into their projections for interest rates.

“Without a connection of economic conditions to rate projections, the dot plot is just a collection of opinions without economic content,” Goolsbee said, referring to the Fed’s Summary of Economic Projections.

Goolsbee discussed the SEP — a report of each of the 19 Fed policymakers’ quarterly forecasts for growth, inflation, unemployment and interest rates — on Friday in prepared remarks for an event at Stanford University’s Hoover Institute.

The Fed’s March Dot Plot

Fed officials could consider linking together, anonymously, each participant’s forecasts for the various economic indicators, Goolsbee said. Doing so would better communicate how certain economic outcomes might impact policy, he argued.

“Over time, more would be revealed about reaction functions as observed changes in the economic environment show the relationships between participants’ views on the outlook and appropriate policy,” he said.

Speaking on the same panel, New York Fed President John Williams suggested that inflation is still headed lower and stressed the central bank’s determination to achieve its price target.

“As we continue to move closer to our 2% longer-run inflation goal, I’m confident that we have the foundation of theory and experience to guide us in restoring price stability,” he said. “We are committed to getting the job done.”

Goolsbee and Williams didn’t comment on the outlook for interest rates.

(Updates with Williams comments in sixth paragraph.)

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