Why does the Fed engage in economic discussions with an audience critical of its policies?
What’s that old joke about how many opinions will you have with 5 economists in a room? (The answer: 6.) Making policy decisions based upon historical trends in economic data is a highly technical and complicated process, subject to divergent views and opinions. Add to this complex process a lag in the effects of a decision made today versus changes in that data and you have the recipe for “Monday-morning quarterbacking.” So it’s no surprise that with the rather tepid recovery from the Great Recession, the Federal Reserve System and its monetary policymaking have been subject not only to scrutiny, but also to increasing criticism.
The economic recovery and Fed monetary policy were the main focus of a public forum hosted by Common Good Ohio at Cuyahoga Community College on a Saturday in early May. Attending the forum were representatives from Common Good Ohio, members of the public, and a few representatives of Policy Matters Ohio and the Federal Reserve Bank of Cleveland. The forum’s agenda was straightforward: Dr. Mark Schweitzer, an economist and senior vice president of the Cleveland Fed, gave a presentation on the economy with a response from Amy Hanauer, executive director of Policy Matters Ohio. Both Dr. Schweitzer and Ms. Hanauer took questions from the audience about their presentations, about the economy, and about the Fed’s process for selecting its boards of directors. In addition, some participants shared their experiences with the uneven economic recovery. At the close of the event, Paul Henderson, executive director of Common Good Ohio, presented Dr. Schweitzer with a petition and letters from constituents requesting that our Bank president, Dr. Loretta Mester, refrain from raising interest rates in the near term so that the economy and job market had more time to recover.
Why does the Fed engage in economic discussions with an audience critical of its policies, you might be wondering? For an elemental and simple reason: The voices of “Main Street” are as important to Federal Reserve policymakers as those of the banking industry and the business community. The Fed has a dual mandate to ensure maximum stable employment and price stability, and seeks to understand economic conditions in all areas of the nation including low- and moderate-income neighborhoods and communities. To ensure that policymakers understand what’s occurring in all parts of the nation, Reserve Bank staff from all Districts collect both quantitative data and qualitative data–anecdotal information from individuals and business in each district. This public forum was one mechanism to collect anecdotal information about economic conditions in all communities.
While reasonable individuals can differ on policy direction, the Fed’s efforts both to be transparent and to understand economic conditions in every corner of our region is imperative to ensuring good policy. The Federal Reserve System, in partnership with the Federal Reserve Bank of Cleveland, works for all sectors of our nation. Participating in a public forum at the request of your constituent is an opportunity for us to help ensure that all views are represented when considering policy and policy changes.