Keeping such a framework secret forces market participants to speculate on reactions rather than focus on data, which Musalem said adds noise and results in more volatile financing costs. He described a "hall of mirrors" effect that occurs when the Fed provides a specific forecast of future moves rather than a broader framework for its decision-making process.
Wednesday, October 21, 2026
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Fed's Musalem Says Framework Over Forecast Cuts Borrowing Costs
US Markets21 days ago
Central bankers do not need to make promises but must explain the logic behind their decisions to maintain democratic legitimacy, Alberto Musalem of the Federal Reserve said. Musalem argued that sharing a well-articulated framework, including 2 or 3 likely scenarios, reduces costs for businesses and households and makes monetary policy more effective by explaining how the Fed turns information into policy.
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