Twenty years ago, the FOMC did not announce its monetary policy decisions, or give any justification for it, and it was left to the markets to infer from the Fed’s actions whether or not there had been a change of monetary policy. Gone are the days when central banks believed it was appropriate to surprise the markets.
Today’s conventional wisdom is that monetary policy predictability will reduce trade-offs, and reduce volatility in both inflation and real economic activity. In other words, communication has become a policy instrument in itself. The more recent trend has been towards explicit forward guidance.