Concocting a credible monetary policy is far from easy, especially with the number of ingredients there are to choose from.

Careful readers of FOMC communications will note that in addition to talking about actual inflation, the committee often talks about inflation expectations. Sandra Pianalto, the president and chief executive officer of the Federal Reserve Bank of Cleveland, explains the important role that...

An examination of GNP forecasts and their implications for monetary policy, showing that although such forecasts have lessened uncertainty about the economy's future course, the errors are still too large to justify basing monetary policy on the near-term GNP outlook alone.