Communicating our expectations for policy has been unusual for us. In my view, when it is possible, such communication should help to align expectations better with reality and thereby improve pricing in asset markets and the effectiveness of policy. Some observers have objected because they think our words have removed too much uncertainty from markets, encouraging people to take financial positions that they will regret eventually and, by holding down long-term interest rates, work at cross purposes with firming policy. I believe the performance of the economy, rather than our words, has shaped expectations beyond the very near term.

To give an indication of how widely expressed a particular view is at a meeting, the minutes use common quantitative wording: ‘‘all,’’ ‘‘most,’’ ‘‘many,’’ ‘‘several,’’ ‘‘few,’’ or ‘‘one,’’ in descending order.

The Fed has only very indirect control over long-term yields and asset prices...To affect long-term rates, the FOMC must somehow signal to the financial markets its plans for setting future short-term rates. The most direct method is through talk...FOMC talk probably has the greatest influence on expectations of short-term rates a year or so into the future, as beyond that point the FOMC has very little, if any, advantage over market participants in forecasting the economy or even its own policy actions.

Ambiguity about the Fed’s long-run inflation intentions has outlived its usefulness.

You can imagine not too far down the road where some things in the statement aren't going to be appropriate.  And we need to decide how and when to change some of that wording.

I read a report in the media just a few weeks ago that referred to the Fed “keeping its pledge” for a “measured pace” of rate increases. Guess what? I don’t think the Fed ever made such a pledge, and I think it’s unfortunate that our effort to offer some insight into our policy inclination is sometimes misconstrued.

Although the basic direction of policy has been more obvious than usual for the last year or so, it will likely become less clear and perhaps more difficult to communicate as we approach the equilibrium or neutral interest rate that is consistent with economic activity at its potential and with low and stable inflation.

In the United States, we have some indirect evidence that crowding out of private views has not increased even as the Federal Reserve has become more talkative. Market interest rates have continued to respond substantially to surprises in economic data.

We need to be particularly careful that people understand how limited our knowledge actually is--the uncertainty and conditionality around any statement we make about future developments.

More is not necessarily always better, and at each step of the way central banks have needed to take account of the potential costs as well as the benefits of greater transparency.

What we say is important, but what we do over time will ultimately determine economic outcomes. We should not allow a desire for clarity of expression to deflect our decisions from those that would contribute best to overall economic performance and which may be difficult to explain easily. And we must take care that policy expectations engendered by communication do not unduly constrain policy action. Furthermore, we cannot allow transparency to limit discussion in the Committee out of concern about how its publication will affect markets and the economy.

Because of concern about market interpretation, policymakers often see talk about policy inclination also as having the potential for constraining future decisions in ways that might interfere with the most-effective achievement of policy objectives. The stronger the market expectations about near-term policy actions, the greater the risk of roiling markets and creating confusion in the event the decision differs from those expectations.

Despite their drawbacks much of the time, conditional statements from the central bank about the near-term course of policy can be useful in certain circumstances. These circumstances might include a situation in which the policymakers and the markets seemed to have substantially conflicting forecasts about the economy and the path of policy; such differences persist despite the central bank's efforts to explain its outlook; and the effect of those divergent views on financial conditions threaten to detract from economic performance.

The possibility that discussions of future policy, even nonspecific, could create presumptions about a string of policy actions makes finding a consensus among policymakers on what to say about future interest rates quite difficult--more so than agreeing on the policy today. It is no accident that the Reserve Bank of New Zealand stands out as about the only central bank to publish such a path and as one of the few in which decisions are the responsibility of only one individual.

Over time, I anticipate further steps toward explaining our views, but at a pace that is likely to be measured.