A History of the Asymmetric Policy Directive

Abstract

From 1983 through 1999, policy directives issued by the Federal Open Market Committee (FOMC) contained a statement pertaining to possible future policy actions, which was known as the "symmetry," "tilt," or "bias" of the directive. In May 1999, the FOMC began to announce publicly the symmetry of its current directive. This resulted in much speculation about the meaning of asymmetric directives, which the FOMC had never officially defined. In this paper, Daniel L. Thornton and David C. Wheelock investigate three suggested interpretations--that: 1) Asymmetry was intended to convey likely changes in policy either between FOMC meetings or at the next meeting; 2) Asymmetry increased the chairman's authority to change policy in the direction indicated by the specified asymmetry; and 3) Asymmetric language was used primarily to build consensus among voting FOMC members. The authors find strong support in the implementation of monetary policy only for the consensus-building hypothesis.