Talk about “Policy inclination” and “Economic outlook” How many central banks weigh the costs and benefits of additional transparency can be illustrated by differentiating communication along the lines offered in the paper Brian Sack and I wrote that is part of this session.2 We separated the effect of talk between policy inclination - the likely near-term path of the policy interest rate - and the economic outlook - the evolution of prices and output over the intermediate and longer term.
Experience shows that central bankers generally have been much more comfortable talking about the economic outlook than about policy inclination. Policy inclination This difference in comfort level relates in part to our evaluation of the interaction of each type of talk with market prices.