Central banks' transparency boosts predictability and improves economic stability worldwide.
Central banks around the world have been communicating more about their policy decisions and economic outlooks. This paper explores how this communication affects monetary policy effectiveness, focusing on whether central banks should talk about future interest rates. By looking at examples like the FOMC in the U.S. and inflation-forecast targeting procedures, the paper shows that sharing assumptions about future policy with the public makes policy more predictable and helps central banks achieve their goals better.