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VOL. 8, NO. 8 • SEPTEMBER 2013­­


A Short History
of FOMC Communication
by Mark A. Wynne

Federal Open
Market Committee
communications have
changed radically over
the past two decades.


wenty years ago, when
the Federal Open Market
Committee (FOMC) decided
to alter the stance of monetary
policy by raising or lowering interest
rates, it did not announce that fact to the
general public. Rather, financial market
participants were left to divine what the
FOMC had decided by watching the
behavior of the “open market desk” in
securities markets.1
Today, when the FOMC decides to
change the stance of monetary policy,
it releases a detailed statement outlining the rationale for its decisions. The
Chairman holds press conferences four
times a year, and FOMC members give
numerous speeches and press interviews
to explain their thinking.2
FOMC communications have
changed radically over the past two
decades.3 These changes have proven
especially important in the current environment, where it is no longer feasible to
adjust interest rates to provide monetary
accommodation. By communicating its
beliefs about the likely stance of monetary policy over the coming months
and quarters, the FOMC can support the
ongoing recovery.

FOMC Statements
The first time the FOMC issued a
statement immediately after a meeting
explaining what action had been decided

was on Feb. 4, 1994.4 That statement simply noted that the committee decided to
“increase slightly the degree of pressure
on reserve positions” and that this was
“expected to be associated with a small
increase in short-term money market
interest rates.” By way of explanation for
why the committee was announcing its
decision, the statement said that this was
being done “to avoid any misunderstanding of the committee’s purposes, given
the fact that this is the first firming of
reserve market conditions by the committee since early 1989.”
In February 1995, the committee
decided that all changes in the stance of
monetary policy would be announced
after the meeting. It was not until July
1995, when the committee had shifted to
easing the stance of monetary policy, that
mention was made of a specific level of
the federal funds rate, when a decision to
ease monetary policy was expected to “be
reflected in a 25 basis point decline in the
federal funds rate from about 6 percent to
about 5¾ percent.”
Through 1996, 1997 and 1998, the
FOMC referred to target levels for the
funds rate of “around” or “about” a particular value and only issued statements
following decisions to change the funds
rate. Starting with the May 1999 meeting,
the FOMC announced that it had made
no change in policy, and initiated the
practice of releasing a statement after

Economic Letter

The committee has
gone from vague
language about
“pressure on reserve
positions” to concrete
statements about its
target range for the
federal funds rate and
the specific economic
developments that
would prompt a
change in that target
in the future.


every meeting regardless of whether the
stance of policy had changed. That same
year it began to refer to specific “target”
levels for the funds rate.
Also starting in 1999, the committee began to issue forward guidance of
a sort in the form of an assessment of
the perceived risks going forward. For
example, after the August meeting, it
announced that “the directive the Federal
Open Market Committee adopted is symmetrical with regard to the outlook for
policy over the near term.” By October of
the same year, the directive was “biased
toward a possible firming of policy going
forward.” However, references to symmetric or asymmetric directives proved
short-lived. Starting in February 2000,
the committee instead referred to risks
of “heightened inflation pressures” or
“economic weakness” in the near term,
that is, risks to the committee’s mandate
to deliver price stability and maximum
sustainable employment.
By 2003, the committee was worried about inflation getting too low, and
it reduced the federal funds rate to the
then-unprecedented level of 1 percent.
Starting with the August meeting, the
committee again began issuing forward
guidance about the stance of policy, noting that it believed that “policy accommodation can be maintained for a considerable period.”
In January 2004, the committee
changed this language to state that it
believed that it could “be patient in
removing its policy accommodation.” The
language was altered once again in May
2004 to state that “policy accommodation
can be removed at a pace that is likely to
be measured.” Then the committee raised
the federal funds rate by 25 basis points at
its June meeting and at each of the subsequent 16 meetings.
The “likely to be measured” language
was included in every statement until
the December 2005 meeting, by which
time the federal funds rate had been
increased to 4.25 percent. Through 2006,
the committee noted that the “extent
and timing” of any additional firming of
policy depended on the evolution of the
economic outlook and specifically the
outlook for both inflation and economic
growth. The tightening cycle ended with
the funds rate at 5.25 percent, where it

remained until the first strains of the
financial crisis began to manifest themselves in August 2007.

Financial Crisis Communications
In response to deteriorating economic
conditions as a result of the financial crisis, on Dec. 16, 2008, the FOMC lowered
the target for the federal funds rate to a
range of 0 to 0.25 percent and noted that
“weak economic conditions are likely to
warrant exceptionally low levels of the
federal funds rate for some time.” Thus
began the period of unconventional
monetary policy.
The FOMC had previously announced
plans to purchase “up to $100 billion”
in government-sponsored enterprise
(Fannie Mae and Freddie Mac) obligations and “up to $500 billion” in mortgage-backed securities. The December
statement included the declaration that
the FOMC “stands ready to expand its
purchases of agency debt and mortgagebacked securities as conditions warrant.”
This program subsequently became
known as QE1.5
The commitment to maintain the fed
funds rate at an exceptionally low level
for an extended period was included in
every statement until August 2011, when
the language was altered to “at least
through mid-2013.” Subsequently the
dates were changed to “at least through
late 2014,” and to “at least through
But at the December 2012 meeting,
the committee made a radical change in
how it communicated its intentions. The
FOMC adopted language stating that it
anticipated that “this exceptionally low
range for the federal funds rate will be
appropriate at least as long as the unemployment rate remains above 6½ percent,
inflation between one and two years
ahead is projected to be no more than
a half percentage point above the committee’s 2 percent longer-run goal and
longer-term inflation expectations continue to be well anchored.” Thus, over the
course of two decades, the committee has
gone from vague language about “pressure on reserve positions” to concrete
statements about its target range for the
federal funds rate and the specific economic developments that would prompt
a change in that target in the future.

Economic Letter • Federal Reserve Bank of Dallas • September 2013

Economic Letter
Evolving FOMC Statements


Chart 1 presents a simple measure of
the evolution of the FOMC’s communications over the past two decades as summarized by the word count in the postmeeting statement.
The first statement, issued on Feb.
4, 1994, was a mere 99 words. The statement issued after the April 30–May
1, 2013, meeting was 669 words and
included—in addition to the committee’s
decision about the stance of monetary
policy—information on the committee’s
assessment of economic conditions, the
economic outlook, the factors that are
likely to prompt a change in the stance of
policy and the extent to which the committee’s voting members agreed on the
policy decision (one member dissented).


FOMC Statement Word Counts Increase, 1994–2013

Word count

’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03

’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13

NOTE: The shaded area is the period of the FOMC’s unconventional monetary policy with interest rates at the effective
lower bound of near zero.


SOURCE: Federal Reserve Board.

FOMC members do not always agree
about the appropriate stance of monetary
policy, and since 2002, dissenting votes
have been made public immediately after
the meeting at which the vote is taken to
enhance the transparency of the monetary policy process. (Prior to this, dissenting votes only became known when
the Record of Policy Actions or the minutes were published after the subsequent
meeting.) Sometimes a dissenting vote
reflects a difference of opinion about the
true state of the economy, something that



is difficult to assess in real time; sometimes it reflects a difference of opinion
about the appropriate policy response to
given economic conditions.
The history of dissenting votes over
the past two decades, shown in Chart 2,
illustrates three things. First, dissenting
votes are not uncommon, but in recent
years it has been rare for more than one
voter to dissent at any one time. The
record is three dissenting votes at the
August and September 2011 meetings.

Dissent was a lot more frequent in the
early 1990s, with as many as four dissents
at one meeting in 1990 and at another
meeting in 1992.
Second, between 2000 and the onset
of the financial crisis, dissenting votes
were particularly rare. This was the
period during which the housing market
boomed and some critics argued that
the FOMC deviated from its previous
rule-like behavior.6 But the record on
dissenting votes suggests that there was

FOMC Dissents Not Uncommon
March 2002:
start including

Dissent in favor of tighter policy

Dissent in favor of looser policy






















Minneapolis Fed

St. Louis Fed

Dallas Fed

Philadelphia Fed

San Francisco Fed

Kansas City Fed

Richmond Fed


Cleveland Fed

Boston Fed
Chicago Fed



NOTES: The Atlanta and New York Feds had no dissenting votes during 1990–2013. The shaded area is the period of the FOMC’s unconventional monetary policy with interest rates at the effective lower
bound of near zero.
SOURCE: Federal Reserve Board.

Economic Letter • Federal Reserve Bank of Dallas • September 2013


Economic Letter

an unusual degree of consensus among
policymakers on the appropriate stance
of monetary policy during this period.
Finally, dissenting votes have become
more persistent in recent years. That is,
a voter who dissents at one meeting is
more likely to dissent at the following
meeting. There have been two instances
in recent years where a voting member
dissented at every single scheduled meeting over the course of a year.
This increased persistence in dissent
is not too surprising. The situation that
has confronted the FOMC since the onset
of the financial crisis is unprecedented,
with short-term interest rates as low as
they can go since the end of 2008 and
expected to remain there for some time.
In such circumstances, one might expect
a wider-than-usual range of opinions
on the committee about the appropriate
course of action. Also, as the committee has come to rely more on forward
guidance to support economic activity,
committing itself to a particular course
of action for longer than was previously
the case, dissents might be expected to be
more persistent.

Tools of Communication
Of course, the post-meeting statement is just one of the ways the FOMC
communicates with the public. It has
always issued minutes after its meetings.
Through 2004, the minutes were released
two days after the subsequent meeting,
which limited their usefulness in conveying the thinking behind the policy decision made at the meeting. In December
2004, the decision was made to bring for-


ward the release of the minutes, and they
now appear three weeks after the meeting
to which they refer, providing additional
insights into the thinking behind policy
Two other major innovations in communication have occurred in recent
years. Following the long-standing practices of other major central banks, the
Chairman now holds a press conference
four times a year.7 Second, the members of the Board of Governors and the
individual Reserve Bank presidents now
release their economic forecasts four
times a year as part of a regular Survey of
Economic Projections. Previously, these
forecasts had only been reported twice
a year as part of the regular Monetary
Policy Report to Congress.8

Increased Transparency
Best practices in central banking
call for transparency in policy deliberations and communicating the outcome
in a timely manner. Over the past two
decades, the FOMC has gone from being
quite secretive in its deliberations to very
transparent. As the committee has had to
deal with the worst financial crisis since
the Great Depression and exhausted
conventional options, unconventional
monetary policy has played a greater role.
And within the class of unconventional
monetary policies, forward guidance—
that is, communication about the likely
future course of policy conditional on
economic developments—has taken on
more importance. This move to increased
transparency has been integral in helping
the FOMC fulfill its mandate.

Economic Letter

is published by the Federal Reserve Bank of Dallas. The
views expressed are those of the authors and should not
be attributed to the Federal Reserve Bank of Dallas or the
Federal Reserve System.
Articles may be reprinted on the condition that the
source is credited and a copy is provided to the Research
Department of the Federal Reserve Bank of Dallas.
Economic Letter is available free of charge by writing
the Public Affairs Department, Federal Reserve Bank of
Dallas, P.O. Box 655906, Dallas, TX 75265-5906; by fax
at 214-922-5268; or by telephone at 214-922-5254. This
publication is available on the Dallas Fed website,

Wynne is an associate director of research
and vice president at the Federal Reserve
Bank of Dallas and director of its Globalization and Monetary Policy Institute.

The FOMC is the main policymaking entity within the
Federal Reserve System. The open market desk at the
Federal Reserve Bank of New York implements the decisions of the FOMC by buying or selling securities in
financial markets.
The Chairman held three press conferences in 2011,
five in 2012 and is scheduled to hold four in 2013.
See “Revolution and Evolution in Central Bank
Communications,” speech by Janet L. Yellen at the
University of California, Berkeley, Nov. 13, 2012.
In 1975, the FOMC was sued under the Freedom of
Information Act by a citizen requesting release of the
committee’s policy directive to the open market desk
at the time of its adoption. The resolution of the case
allowed the committee to defer release of the directive
until after the subsequent meeting of the committee.
The FOMC’s case for secrecy is critically evaluated in
“Monetary Mystique: Secrecy and Central Banking,” by
Marvin Goodfriend, Journal of Monetary Economics, vol.
17, January 1986, pp. 63–92.
QE stands for quantitative easing, an approach to conducting monetary policy when interest rates have been
cut to the lowest possible levels. It was pioneered by the
Bank of Japan.
See, for example, “Housing and Monetary Policy,” by
John B. Taylor, paper presented at the Federal Reserve
Bank of Kansas City’s Economic Symposium, Jackson
Hole, Wyo., September 2007.
For example, the president of the European Central
Bank holds a press conference 11 times a year, following
each meeting of the bank’s Governing Council. The Bank
of England holds a press conference four times a year,
following the release of its quarterly Inflation Report.
All the governors and Reserve Bank presidents give
regular speeches and interviews, and the frequency of
these speeches has also increased over time.

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