We entered unprecedented territory as we employed new policy tools to stem the financial crisis and limit the damage to the economy from the severe economic recession. There was no established framework for making policy decisions in such an environment, and that added to the difficulties in determining appropriate policy. It also created difficulties for the Fed’s communications.
In my view, a high priority for the Fed must be to strengthen our monetary policy framework and articulate that framework to the public so that they will better understand the basis for our decisions and be better able to formulate expectations of future policy actions.