As we all know, the inflation outcome has been influenced by external and policy related factors – most of which are beyond the control of monetary policy. Imported inflation alone accounts for more than 60 percent of our domestic inflation outcome.
So, as the Federal Reserve System plans for its second century, I would say that the importance of two-way communication is a key lesson from the System’s first century. In order for the Fed to continue to be effective, it needs to communicate its policy decisions transparently to the public. Conversely, it also needs the public’s input on how those policies are affecting them.