The Need for Transparency in Federal Reserve Policies

The Federal Reserve's decision-making processes are often criticized for their lack of transparency, leading to calls for audits and reforms. Historical evidence suggests that when the Fed adheres to a specific monetary rule, such as the modified Taylor rule previously utilized, economic outcomes tend to improve compared to discretionary policies. This consistency allows market participants to make informed decisions based on predictable policies. Without such transparency, Congress faces challenges in overseeing the Fed's performance, as there are no clear standards to assess its monetary policy effectiveness.