“Boring is best” is how the former governor of the Bank of England Mervyn King once aptly put it. But whether we like or not, my profession has been attracting ever greater attention. Rarely was monetary policy such a topic of intense public debate in the international arena as it is today.
The Committee can do this by its communication policies, by establishing certain patterns of behavior, or both. I will focus here on the effect on expectations of the FOMC’s patterns of behavior, of which gradualism is an example. Suppose the FOMC decided at a given meeting to raise the federal funds rate 25 basis points.