Ben Bernanke's Fed

5

Blowing Smoke

The Fed’s EvolvingCommunication Strategy

Greenspan’s term at the Fed saw not only a steady decrease in political pressure, but a closely related evolution in the way central banks communicated with the public. In the past, central bank communication could be described as “blowing smoke”: the bankers were purposefully ambiguous about their policy actions and economic forecasts. Starting in the late 1980s, however, “no-smoking” rules began to appear at many of the major central banks. As I will show, it is not coincidence that clearer communication and reduced political pressure developed more or less simultaneously: a decline ...