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Fed economist: We talk too much to public with 'limited attention span'

When it comes to communicating with the public, the Federal Reserve may find it just talks too much.

That at least is the view of Dallas Fed economist Antonella Tutino, who believes "the public's limited attention span" makes lengthy and complicated Fed statements a detriment to effective communication.

"A central bank should be concerned about overwhelming the private sector with too many details in its pronouncements," Tutino said in an analysis on the branch's website. "In so doing, it runs the risk that the less-than-fully engaged public may misinterpret the statements, leading to an unintentional and counterproductive response."

Indeed, the Fed has experienced a communication gap with the public and the markets as it has tried to normalize policy after the extraordinary measures it took during the financial crisis.

Starting essentially with the "taper tantrum" in 2013, the Fed has had a series of clumsy experiences in trying to get the market used to any tightening. Most recently, central bank officials have expressed frustration with the market's low expectations for rate hikes this year.

The release Wednesday of minutes from the April meeting jarred market participants somewhat, with expectations of a June rate hike now pegged at 26 percent after being close to zero for the previous several weeks.

Still, Tutino said such problems can avoided with simple brevity.

"Central banks, with the explosion of new media outlets, have more opportunities than ever to provide information, while the private sector must choose from the competing media sources," she wrote. "Thus, for a central bank to remain relevant, it must carefully ponder what to say and whether changes in the economic environment warrant the public's attention."

It's true that policy statements after meetings have gotten dramatically longer.

A statement after the Jan. 31, 1996, meeting ran just 140 words and was typical of the communiques of the Alan Greenspan-run Fed. The April 2016 statement, by contrast, ran 576 words, in keeping with the Federal Open Market Committee meetings under current Chair Janet Yellen and her predecessor, Ben Bernanke.

Tutino concedes that there are times when the committee may want to go longer — for instance, if it is emphasizing multiple economic goals.

However, for the most part the message should be short.

"In reality, the central bank faces a private sector with limited ability to process information," Tutino wrote. "Thus, the central bank seeks the most succinct and effective message to meet its employment and inflation targets. The length of the message — its informativeness — is measured in bits of information."