Is the Fed Leading Public Perception Toward Distrust?

Should an anxious stakeholder be given less information? All the rules and evidence available to corporate communicators confirm the opposite.

Surprising to us then is the New York Times disclosure that, before they announced their $600 billion “quantitative easing” plan to shore up the US economy, Federal Reserve officials seriously debated whether Fed Chairman Ben Bernanke should hold “occasional” (presumably, rather than frequent, day-of) news briefings to explain the bank’s economic guidance.

The Fed’s dilemma is clear. It’s caught between an academic rock and a political hard place.

The theory of “inflation targeting” (a publicly posted, presumably reasonably rising, rate) is that it can provide guidance for stakeholders (e.g., companies) to plan pricing and hiring.

It would—as the New York Times points out—“enhance transparency and accountability” by taking some of the mystery out of the Fed’s forward view, as it does for other central banks like the Bank of England.

Mr. Bernanke advocated the targeting idea as an academic scholar, but put it on hold when he became chairman in 2006, at least partly because of political pressure. Now, the Fed’s asset-buying “QE2” strategy has drawn the rancor of conservatives and political commentators, and the public posting of inflation targets is off the table.

The Fed’s apparent tip-toe away from transparency was evident too when the media (and we) learned only by reading the minutes of the Fed’s monetary policy committee that the group had held an unannounced, and unreported, video conference several weeks earlier to discuss the serious European sovereign debt crisis.

By the time you read this, the forces of discovery will be upon the Fed. Old line and online media, bloggers and politicians will pry at the lid on information. Stakeholders, to remain as such, must perceive a plan in their interest. And the Fed will learn as many companies have, that perception management is the organization’s primary route to support, a sustainability goal not achieved by shading timely truth.

E. Bruce Harrison
Adjunct Professor, Public Relations and Communications Graduate Program,
Georgetown University, and
CEO, EnviroComm International