The Fed’s Evolution Is Coming to a Computer Screen Near You

In part because the public’s understanding of future inflation seems to drive real-world economic results, the Fed is intent on clearly communicating what it is doing, and why. Officials have also increasingly taken the view that the Fed should try to be accountable to the people it serves.

The Fed went to great lengths to get the broader public involved in the policy overhaul, holding “Fed Listens” community events around the country alongside more typical academic conferences. On Thursday, Mr. Powell’s speech will be simultaneously available to academics and government officials — the usual Jackson Hole conference invitees — and armchair enthusiasts who have been following along from home.

While the Jackson Hole conference’s new democratization is driven by necessity, it is a fitting early conclusion for a review that focused on openness.

Wall Street analysts expect officials to set out a more concrete plan for the near future of interest rates once they have made the formal tweaks to their long-run statement. Fed officials signaled in their July meeting minutes that the updated document “would be very helpful in providing an overarching framework that would help guide the committee’s future policy actions and communications.”

To some degree, the anticipated adjustments will just commit to what is already happening in practice. Fed officials have given no indication that they are eager to raise rates, now at nearly zero, even if unemployment should fall quickly. Mr. Powell said at his late-July news conference that the framework changes “are really codifying the way we’re already acting with our policies.”

Still, “it’s a big change for them to codify and formalize it,” said Julia Coronado, founder of MacroPolicy Perspectives and a former Fed economist, in part because it means that Federal Open Market Committee, which sets interest rates, will now be tied into the approach. “It commits future committees.”

But it is unclear whether the adjustments Mr. Powell and his colleagues make will be enough to deal with the changes that have quietly transformed the modern economy.

Article source: https://www.nytimes.com/2020/08/26/business/economy/fed-meeting-powell.html