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Powell: Discussion of the paper "Language after Liftoff: Fed Communication Away from the Zero Lower Bound"
This paper reviews Federal Open Market Committee (FOMC) communications from the time the Committee began issuing regular postmeeting statements in 1999 to the present.1 The authors provide an extended and insightful discussion of the theory and practice of providing forward guidance about monetary policy. They offer one central lesson: Data-based forward guidance is mostly good, while time-based forward guidance is mostly bad. The authors show that data-based guidance has desirable characteristics and can make monetary policy more effective. When clearly articulated and well understood, it allows markets to react ... (full story)