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Opinion
Matthew C Klein

Yellen and the Fed Go Dark

The Federal Reserve is shifting from myopic qualitative rules to vague qualitative forms of discretion.
No, I don't feel like clarifying my last statement. Photographer: Andrew Harrer/Bloomberg
No, I don't feel like clarifying my last statement. Photographer: Andrew Harrer/Bloomberg

It's hard to believe now, but the Federal Reserve used to keep its policy decisions a secret until weeks after the fact. Announcements at the end of each meeting, much less the detailed explanations and the news conferences, are all recent practices. The Fed's latest policy statement, and subsequent comments by the central bank's new chief, Janet Yellen, both suggest that some policy makers are having some second thoughts about the push for greater transparency. Opacity is back on the menu.

Compare the second-to-last full paragraph of today's statement to the last paragraph of the statement from Jan. 29. Gone is the so-called Evans Rule, which gave guidance about when the Fed would begin raising short-term interest rates based on a numerical threshold for unemployment. The rule was never very helpful anyway, because the Fed never said it would raise interest rates once unemployment fell below 6.5 percent, only that it would become less tolerant of inflation at that point. Since inflation is much slower than the target rate of 2 percent, the Evans Rule served only to confuse. In this case, less information about the Fed's intentions is clearly better.