Fed likely to share findings from monetary policy review in first half of 2020, Bowman says

Findings from the Federal Reserve’s year-long look at its monetary policy strategy, tools and communication practices could be shared with the public in the first half of next year, the Fed Board’s community banking representative told participants of a Fed Listens session in St. Louis Wednesday.

Ways the Federal Reserve can make the most of its tools for planning and executing its monetary policy objectives, and possibly come up with new tools to achieve those ends, are up for discussion as the central bank considers new approaches to policy, Fed Board Gov. Michelle (“Miki”) Bowman told attendees of the session, held at the Federal Reserve Bank of St. Louis (Mo.).

Transparency to the public is a key objective of this effort, she said. “Since I became a Board member almost a year ago, it’s become clear to me that people not only are willing to engage on complex economic issues, they also want to know that their concerns are being taken into account on issues that affect their financial well-being,” Bowman said in prepared remarks. “The movement toward greater transparency and public engagement is ongoing, and advancing that effort is one of my top priorities.”

Clear communication of the Fed’s policies helps the Fed achieve its goals, Bowman said, since the Fed’s published views on the economic outlook and interest-rate expectations are taken into account by consumers and businesses as they make decisions on spending, investment, and hiring. “For that reason, our policy communications are themselves an important part of the Fed’s toolkit for influencing the direction of the economy,” she said.

Bowman highlighted her desire to learn how monetary policy affects not only the financial markets but also communities in both rural and urban areas. “My colleagues and I are keenly aware of our responsibility to focus on how the decisions we make affect the real economy for people in communities all across the country,” she said.

While the Fed’s dual mandate – maximum employment and stable prices – is set by Congress, how the Fed reaches those two goals is the focus of this year’s review of Fed policy making. “One question I hope to explore is whether we need new strategies to more effectively achieve our goals. For many years, inflation has run modestly below our 2 percent objective,” Bowman said. “Given that, it would be helpful to hear from you whether you think the Federal Open Market Committee should consider strategies that aim to have inflation exceed our target for a time, to make up for the earlier period of time when it fell short. Or would that threaten the decades of success the Fed has had keeping the public’s expectations for inflation low and stable?”

Bowman, pointing to the “policy levers” in the Fed’s existing monetary policy toolkit – setting interest rates, adjusting the size and composition of the Fed’s balance sheet, and communicating the expected future path of policy – queried whether there are ways the Fed could be more effective in achieving its goals.

“Are there other tools we should consider to help us reach and sustain our objectives more effectively?” she posed. “I also want to know how the Federal Open Market Committee’s communication of its policy framework to the public might be improved. How can we help you better understand our work so you can hold us accountable?”

Wednesday’s Fed Listens participants included members of the St. Louis Fed’s six advisory councils: the Agribusiness Industry Council, Community Depository Institutions Advisory Council, Health Care Industry Council, Real Estate Industry Council, and Transportation Industry Council.

Introductory Remarks by Fed Gov. Michelle W. Bowman at a Fed Listens Event sponsored by the Federal Reserve Bank of St. Louis, St. Louis, Mo.