Ben Bernanke has not yet begun to fight by Neil Irwin

Monetary Policy Innovations by Simon Wren-Lewis

A Fed Focused on the Value of Clarity by Binyamin Appelbaum

The Federal Reserve’s decision on Wednesday to announce specific economic objectives for its policies would have stunned and dismayed earlier generations of central bankers, who regarded secrecy as a virtue and obfuscation as a prized technique for manipulating financial markets. 

“Since I’ve become a central banker, I’ve learned to mumble with great coherence,” Alan Greenspan, a former Fed chairman, told reporters in 1987. “If I seem unduly clear to you, you must have misunderstood what I said.” 

But a greater appreciation for the virtues of transparency has been one of the most important shifts in central banking in recent decades. It is a response to public demands for increased accountability and an embrace of economic research on monetary policy that finds speaking clearly is more effective than mumbling. The Fed’s vice chairwoman, Janet Yellen, last month described the result as a “revolution.” 

... 

But the change could have more important consequences in the future. Until now, when economic conditions changed, markets were left to wonder whether Fed policy would change, too. Now, if the pace of growth increases and unemployment falls more quickly, the Fed has already said that it will move to raise interest rates sooner. If the recovery once again falters and unemployment rises, the Fed has already said that it will continue to suppress rates.

Better yet, investors can respond immediately, an effect that Mr. Bernanke described on Wednesday as a kind of “automatic stabilizer” for the economy.

“If the outlook worsens and that leads markets to think that the increase in rates is further out in the future, that will tend to lower long-term rates and that will be supportive of the economy,” he said. “It kind of offsets adverse shocks.”