Don Kohn14 argues that “more is not necessarily always better, and at each step of the way central banks have needed to take account of the potential costs as well as the benefits of greater transparency”. In particular it is argued that the publication of some kinds of information could make it more difficult for policymakers to do their job, with discussions of the possible path of future interest rates being seen as particularly hazardous, if they appear “as a firmer pre commitment than they were intended to be”.15 Arguably these should not be a first order issues for central banks with a transparent inflation targeting framework. The objectives of policy are clear, and outside commentators should have access to enough information to work out the future direction of rates for themselves. Nevertheless there has been a closely related debate about how transparent an inflation targeting central bank should be about the interest rates on which its forecasts are based. An obvious reason for wanting more direct information about the ‘preferred’ path is to get direct evidence on the interest rate strategy. (How quickly will rates rise? What are the advantages of a ‘wait-and-see’ approach?) 13  As Mishkin puts it ‘. [H]aving secretive central banks is inherently undemocratic…[B]asic democratic principles require that the central bank be accountable for its actions: this requires that the public understands what the central bank is doing.
To be sure, there have been times when differences of view about the central projection have been too significant to be handled within the ambit of the fan chart and on those (few) occasions the Inflation Report has included material illustrating the minority view. But, as the MPC’s preface to the Inflation Report notes, the fan charts reflect the Committee’s best collective judgement about the most likely paths for output and inflation and the uncertainties surrounding the central projections, while recognising that members may have slightly different views about the underlying assumptions. Forecasts and interest rate decisions How influential is the forecasting process when it comes to the actual business of taking decisions about interest rates? One yardstick might be whether the MPC is more likely to change rates in Inflation Report months. There is no necessary reason why this should be so: information accrues relatively evenly over the year, and the Committee goes through the same decision taking process every month. On the other hand, the MPC might be more likely to change rates after a systematic and full review of the inflation outlook, rather than in response to the news on the month. On this argument, ready-reckoners may give a rough indication of what the impact of new data may be, but they are no substitute for a full analysis. So in non-Inflation Report months the MPC may sometimes decide to ‘wait-and-see’ – to postpone a possible interest rate change until more evidence has accumulated.