What the Fed Isn't Saying: Gaps in Communication and How to Fix Them

Transparent communication between a central bank and the public is essential because it shapes the bank’s credibility and influences how monetary policy transmits to the economy. In recent decades, central banks around the world have become increasingly transparent as they recognize that clear and consistent communication is a key instrument for guiding economic agents’ expectations. In the United States, the Federal Reserve System (Fed) has also strengthened its communication framework to better clarify the basis of its monetary policy decisions by expanding its published materials, holding regular press conferences, and improving the timeliness of policy-related information. However, important challenges remain in ensuring that the underlying logic of these decisions is conveyed in a manner that is accessible to its intended audience. Improving the Fed’s approach to communicating this rationale is therefore an issue that merits closer attention.

The Structure of the Federal Reserve and Its Communication Evolution

The central bank of the United States, commonly known as the Federal Reserve or the “Fed,” was established in 1913. It comprises the Board of Governors in Washington, D.C., and twelve regional Federal Reserve Banks. Together, their leaders participate in the Federal Open Market Committee (FOMC), the body responsible for setting U.S. monetary policy. The Board of Governors consists of seven members appointed by the President and confirmed by the Senate. The FOMC includes twelve voting members: the seven Governors, the President of the Federal Reserve Bank of New York, and four of the remaining Reserve Bank presidents who serve one-year rotating terms. All twelve Reserve Bank presidents attend and contribute to deliberations, regardless of voting status. The Chair of the Board of Governors also serves as Chair of both the FOMC and the Federal Reserve System (Understanding the Federal Reserve’s Structure, n.d.).

Source: Federal Reserve Bank of Cleveland, ‘Understanding the Federal Reserve’s Structure’, retrieved from https://www.clevelandfed.org/about-us/understanding-the-federal-reserve.

The Fed’s communication with the public has improved significantly over time. Under Chair Alan Greenspan (1987–2006), the communication style used in speeches, testimonies, and public statements was deliberately opaque. This approach—often referred to as “Fedspeak”—sought to obscure policymakers’ intentions in order to prevent markets from fully anticipating the effects of policy changes. Fully anticipated monetary policy is less effective in influencing real output and employment, a principle consistent with rational expectations theory (Muth, 1961).

However, deliberately obscured communication raises a question: what is its purpose if clarity is essential for accountability and credibility? Under Chair Ben Bernanke (2006–2014), Fedspeak was replaced by a more transparent strategy known as “forward guidance,” which provides explicit signals about future policy to shape expectations and reduce uncertainty. Since then, the Fed’s communication has become substantially more open. Today, the FOMC uses a set of communication tools that comprise a post-meeting statement, the Summary of Economic Projections, an implementation note, a press conference held by the Chair, and meeting minutes released three weeks later. A 2024 survey by the Hutchins Center at Brookings finds that most academics and market participants believe the Fed’s communication has improved markedly, with the Chair’s press conference viewed as the most valuable addition (Wessel & Boocker, 2024).

Source: Daly, 2025, p.2.

Why Transparent Communication Matters

Transparent communication enhances the effectiveness of monetary policy, promotes economic stability, and strengthens the central bank’s independence and accountability. Because financial markets are forward-looking, monetary policy works not only through adjustments in short-term interest rates but also through the expectations that markets form about the future path of those rates (Hetzel, 2024). Empirically, Acosta (2023) finds that a high level of transparency can amplify the impact of monetary policy shocks on nominal and real interest rates by roughly 40 percent. When transparency is low, the link between short-term rate changes and the expected path of future rates becomes more uncertain, diminishing the effects of policy shocks on real interest rates.

Clear communication also contributes to broader economic stability. As Ernst et al. (2025) emphasize, transparency helps economic agents form an accurate understanding of the central bank’s actions, which in turn improves markets’ ability to infer future interest rates. Fischer et al. (2023) show that releasing FOMC materials in real time rather than with the five-year delay would have allowed markets to anticipate “as much as 125 basis points of additional easing during the 2001 and 2008 recessions,” reducing forecast errors by 40–50 percent (p. ii). Finally, transparent communication demonstrates that the central bank makes its decisions independently and on the basis of clear evidence. Explaining each policy decision—its data, rationale, and risks—enables the public to monitor and evaluate the institution, reinforcing credibility and insulating it from political pressures.

Limitations of the Fed’s Communication Practices

Former Chair Ben Bernanke, in his working paper Improving Fed Communications: A Proposal, highlights several weaknesses in how the Fed communicates its monetary policy decision-making process. First, he argues that, unlike other major central banks, the Fed provides limited economic context when announcing policy decisions. Much of the explanation comes from the Chair’s remarks and responses to reporters at the press conference (Bernanke, 2025). By contrast, many other central banks routinely release detailed background materials, including assessments of economic and financial conditions, discussions of policy strategy, analyses of key issues shaping the decision, and evaluations of risks to the outlook. The Fed does publish similar information, but only twice a year in its Monetary Policy Report rather than alongside each policy announcement.

Second, the Fed’s communication lacks a unified baseline macroeconomic forecast. Instead of presenting a single internally consistent projection, the Fed issues the Summary of Economic Projections (SEP), which compiles nineteen individual projections from FOMC participants for output, employment, inflation, and the policy rate (Bernanke, 2025). While informative, a series of individual forecasts is less transparent than a shared outlook, making it harder for the public to understand how the Committee views the economy or why it makes certain decisions. Moreover, each projection relies on assumptions that are not disclosed, further obscuring the decision process.

A third weakness, according to Bernanke, is the SEP’s overemphasis on the median forecast. Presenting only the median conveys an unwarranted sense of precision and downplays the uncertainty and conditionality of future policy. Mary C. Daly, President of the Federal Reserve Bank of San Francisco, raises a similar concern: strong forward guidance after the pandemic had anchored public expectations so tightly that it became difficult for the Fed to recalibrate those expectations when economic conditions changed and inflation surged (Daly, 2025). Her concern is that definitive or overly precise guidance during periods of high uncertainty can lock expectations in ways that constrain the central bank’s flexibility.

Another challenge, not highlighted by Bernanke, concerns the Fed’s limited communication with the broader public. While financial markets receive detailed and technical information, households, workers, and firms—whose wage-setting, price-setting, and spending decisions ultimately drive inflation and the real economy—receive much less attention (Blinder et al., 2024). As these authors emphasize, democratic accountability requires central banks to communicate with constituencies beyond financial professionals, including legislators, businesses, and the general public. Yet evidence from a survey of more than 80,000 U.S. households shows that the public has a weak understanding of monetary policy and limited knowledge of the Fed’s role (Coibion et al., 2021). Moreover, households tend to rely more on social media or information from friends and family than on conventional news outlets, which they often neither follow nor trust, and this leads to expectations that further diverge from the Fed’s guidance.

There are also criticisms of the Fed’s preference for a “language of discretion.” It is reflected in statements that stress “assessing incoming data” or making decisions “meeting by meeting,” while avoiding explicit references to any underlying policy rule, reaction function, or systematic strategy. As Hetzel (2024) argues, this discretionary tone is deliberate: avoiding a specific rule “looking over their shoulders” allows policymakers to maintain flexibility and prevents their decisions from being constrained by such a rule (p. 10). However, Hetzel contends that following and publishing a rules-based strategy would actually strengthen independence and transparency by making political interference more visible. Any departure from the rule would immediately signal possible external pressure; for example, to keep interest rates artificially low. Such an approach, he argues, would also deepen internal FOMC debates, as future Fed officials would need to be conversant with the policy rules that have historically guided effective monetary policy.

Strengthening the Fed’s Transparency and Communication Practices

First, the Fed should base its rationale on a specific policy rule or strategy rather than relying on discretionary language. Hetzel (2024) proposes that the Fed explicitly state the policy rule it follows, including numerical parameters, and publish a consensus, internally consistent SEP that contains the exact forecasts used to compute that rule. This would also address Bernanke’s (2025) concern that each FOMC participant currently submits individual projections based on undisclosed assumptions, leaving the public unable to understand the framework behind policy decisions. Publishing a shared forecast and a clearly defined rule would give the public all the relevant inputs to the decision and allow them to assess whether policy is being implemented systematically. It would also strengthen internal deliberations, as FOMC participants would need to explain why their own assessments deviate from the Board staff’s rules-based forecast.

Second, the Fed should complement its baseline outlook with explicit alternative scenarios to better address uncertainty and support risk-management decision-making. Bernanke (2025) points out that many peer central banks already do this by routinely publishing quantitative analyses of upside and downside scenarios alongside their baseline projections; for instance, the European Central Bank and the central banks of Australia, New Zealand, and Sweden. He recommends that the Fed adopt similar practices and use language that signals conditionality rather than precision. For example, policymakers could present the most likely scenario while clearly describing how they would respond if inflation were to prove more persistent or, conversely, if it were to fall more sharply than anticipated (Bernanke, 2025).

Third, the Fed’s communication should be tailored to different audiences through a multi-layered strategy. As Blinder et al. (2024) argue, monetary policy statements are often too complex for non-experts, which limits public understanding and weakens the transmission of policy. A layered approach might involve simple social-media messages for the general public, intermediate-level explanations on official websites, detailed reports for experts, and listening events that engage directly with ordinary citizens. Crucially, the message must remain consistent across all layers. Blinder et al. emphasize that simpler language, visual aids, and messages tied to everyday life can significantly improve public comprehension. Echoing this point, Coibion et al. (2021) find that households learn more from simple numerical information than from formal FOMC statements, and that repeated communication is necessary to influence expectations; one-off messages rarely succeed.

The Fed has made important strides in improving its communication, but significant opportunities remain to enhance its transparency. Adopting a more rules-based approach, providing clearer and more coherent forecasts with scenario analysis, and tailoring messages to different audiences would strengthen the central bank’s credibility, better anchor inflation expectations, and improve the effectiveness of monetary policy.

References

Acosta, M. (2023). A New Measure of Central Bank Transparency and Implications for the Effectiveness of Monetary Policy. International Journal of Central Banking, 19(3), 49–97.

Bernanke, B. S. (2025). Improving Fed communications: A proposal from Ben Bernanke (Working Paper No. 102). Hutchins Center on Fiscal & Monetary Policy, The Brookings Institution. https://www.brookings.edu/articles/improving-fed-communications-a-proposal/

Blinder, A. S., Ehrmann, M., De Haan, J., & Jansen, D.-J. (2024). Central Bank Communication with the General Public: Promise or False Hope? Journal of Economic Literature, 62(2), 425–457. https://doi.org/10.1257/jel.20231683

Coibion, O., Gorodnichenko, Y., & Weber, M. (2021). Monetary policy communications and their effects on household inflation expectations (Working Paper No. 25482; NBER Working Paper Series). National Bureau of Economic Research.

Daly, M. C. (2025). Dynamic Central Bank Communication (FRBSF Economic Letter). Federal Reserve Bank of San Francisco.

Ernst, E., Merola, R., & Ward Auclair, A. G. (2025). Central bank communication: A quantitative assessment. Central Bank Review, 25(3), 100212. https://doi.org/10.1016/j.cbrev.2025.100212

Fischer, E., McCaughrin, R., Prazad, S., & Vandergon, M. (2023). Fed Transparency and Policy Expectation Errors: A Text Analysis Approach [Staff Reports]. Federal Reserve Bank of New York. https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1081.pdf

Hetzel, R. L. (2024). Enhancing FOMC Transparency: Making Implicit Monetary Policy Rules Explicit. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4946338

Muth, J. F. (1961). Rational Expectations and the Theory of Price Movements. Econometrica, 29(3), 315. https://doi.org/10.2307/1909635

Understanding the Federal Reserve’s Structure. (n.d.). Federal Reserve Bank of Cleveland. Retrieved November 27, 2025, from https://www.clevelandfed.org/about-us/understanding-the-federal-reserve

Wessel, D., & Boocker, S. (2024). Federal Reserve Communications: Survey Results. Hutchins Center on Fiscal & Monetary Policy, The Brookings Institution.