00:00So, if forward guidance is ill-suited to normal times, how about the new Fed chief commits, at a meeting
00:07just like this, to some explicit reaction function?
00:12Surely he could tell us his interest rate path, if, say, the data were to come in hot or cold.
00:18Well, I wish our understanding of the economy were so precise as to provide a mechanical, tried-and-true answer.
00:26That some simple function, like a Taylor rule, could be rigorously relied upon.
00:33But our knowledge just does not extend that far, at least not yet.
00:39And other factors most relevant to the proper conduct of monetary policy, they change over time.
00:46Providing forecasts to illustrate the Fed's reaction function works better in theory than in practice.
00:54Better in the lab than in the field.
00:58I am not alone in noticing that forward guidance in 2021, to cite just one example, might well have slowed
01:06the policy response to high inflation.
01:09In my term as chairman, my colleagues and I will endeavor to construct more reliable models, more robust rules, and
01:18will do this knowing that accuracy in forecasting is still just an aspiration.
01:24With so much changing so fast, in our geopolitics, global supply chains, technology, it's wise to be modest about what
01:34we can and cannot know as we sit here today.
01:38In the same spirit, we should receive the full range of ideas on matters that may inform the Fed's monetary
01:45policy discussions.
01:47If the aim is optimal decision-making, and it should be, we should not crowd out views on the economy.
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