Opaque rather than transparent: Why the public cannot monitor monetary policy

Federal Reserve officials and many observers of monetary policy claim that the implementation of monetary policy has become more “transparent” over the last decade. This paper argues that monetary policy is anything but transparent because multiple and conflicting goals for monetary policy still exist, precise targets for these goals never are defined, the Fed’s economic model is unknown to the public and, by confusing its apparent intermediate target variable with its true policy instrument, actions taken to be stimulative can be contractionary and vice versa.