Mohamed A. El-Erian , Columnist

A Simple Idea to Improve Fed Communication

The central bank should eliminate its “dot plot,” which signals the direction of interest rates but can be misinterpreted by the markets.

February 18, 2019 at 10:00 PM UTC

By Mohamed A. El-Erian

Mohamed A. El-Erian is a Bloomberg Opinion columnist. A former chief executive officer of Pimco, he is president of Queens’ College, Cambridge; chief economic adviser at Allianz SE; and chair of Gramercy Fund Management. He is author of “The Only Game in Town.”

Fed Chair Jerome Powell is giving more news conferences.
Photographer: Al Drago/Bloomberg

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Federal Reserve officials announced in November that they are conducting a review of “communication practices” as part of a larger reassessment of the conduct and effectiveness of monetary policy.

The reappraisal comes as most people, including first and foremost the Fed itself, are concerned about avoiding a repeat (as early as next month) of the type of miscommunication that contributed to the fourth quarter’s disorderly market sell-off. Any changes should aim to do more than simply add elements to enhance transparency and forward policy guidance. The central bank should also consider ending some practices that are vulnerable to repeated misinterpretations.