If this gives indications that differ markedly from those which could be reasonably inferred in real time, outside observers might extract a distorted picture of our intentions. Even prudent policy conduct could appear ex post – and be deplored – as evidence of incorrect decisions. This could drain the central bank’s stock of credibility.
All this is not new and revives memories of the 1970s. Were the spectacular policy mistakes of that unfortunate decade due to poor economic theory, poor policy or a biased representation of the economy? It was probably a blend of all of these factors, with the last one carrying substantial weight.