its policy framework somewhat more explicit. first, the fed is currently in a good and historically rare situation, having built a consensus both inside and outside the fed for good policies. we would be smart to try to lock in this consensus a bit more by making our current procedures more explicit and less mysterious to the public. second, making the fed's inflation goals and its medium - term projections for the economy more explicit would reduce uncertainty and assist planning in financial markets and in the economy more generally. finally, any additional anchoring of inflation expectations that we can achieve now will only be helpful in the future. to move substantially further in the direction of inflation targeting, should it choose to do so, the fed would have to take two principal steps : first, to quantify ( numerically, and in terms of a specific price index ) what the federal open market committee means by " price stability ", and second, to publish regular medium - term projections or forecasts of the economic outlook, analogous to the inflation reports published by both inflation - targeting central banks. particularly now that we are in the general range of price stability, i believe that quantifying what the fomc means by price stability would provide useful information to the public and lend additional clarity to the policymaking process. let me add a caveat however. despite the potential long - run benefits of such a change, fomc members may be concerned at this juncture that the congress and the public would misperceive the quantification of price stability as an elevation of the fed's price stability objective above its employment objective in violation of the dual mandate, even if that were in no way the intention. although personally i have no doubt that quantification of the price stability objective is fully consistent with the current dual mandate, i also appreciate the delicate issues of communication raised by such a change. realistically, this step is unlikely to occur without a good bit more public discussion. i hope that my talk today contributes to that discussion. the publication of medium - term forecasts does not raise nearly the same difficult political and communication issues that quantification of price stability may, in my view, and so i propose it here as a more feasible short - term step. the fomc already releases ( and has released since 1979 ) a range and a " central tendency " of its projections for nominal gdp growth, real gdp growth, pce inflation, and the civilian unemployment rate twice each year, publishing them as

( for example ) on what the private sector infers from that action about likely future policy actions, about the information that may have induced the policymaker to act, about the policymaker's objectives in taking the action, and so on. thus, taking the " right " policy action - - in this case, changing the federal funds rate by the right amount at the right time - - is a necessary but not sufficient condition for getting the desired economic response. most inflation - targeting central banks have found that effective communication policies are a useful way, in effect, to make the private sector a partner in the policymaking process. to the extent that it can explain its general approach, clarify its plans and objectives, and provide its assessment of the likely evolution of the economy, the central bank should be able to reduce uncertainty, focus and stabilize private - sector expectations, and - - with intelligence, luck, and persistence - - develop public support for its approach to policymaking. of course, as has often been pointed out, actions speak louder than words ; and declarations by the central bank will have modest and diminishing value if they are not clear, coherent, and - - most important - - credible, in the sense of being consistently backed up by action. but agreeing that words must be consistently backed by actions is not the same as saying that words have no value. in the extreme, i suppose a central bank could run a " marcel marceau " monetary policy, allowing its actions to convey all its intended meaning. but common sense suggests that the best option is to combine actions with words - - to take clear, purposeful, and appropriately timed policy actions that are supported by coherent explanation and helpful guidance about the future. one objection that has been raised to the public announcement of policy objectives, economic forecasts, and ( implicit or explicit ) policy plans by central banks is that even relatively modest commitments along these lines may limit their flexibility to choose the best policies in the future. isn't it always better to be more rather than less flexible? shouldn't the considered judgment of experienced policymakers always trump rules, even relatively flexible ones, for setting policy? i agree that human judgment should always be the ultimate source of policy decisions and that no central bank should - - or is even able to - - commit irrevocably in advance to actions that may turn out to be highly undesirable. however, the intuition that more flexibility is always better than less flexibility is