The Federal Reserve has a tough job, and its communications strategy makes it tougher.

The Fed Open Market Committee, consisting of the governors and regional banks’ presidents, have a mandate to accomplish price stability and maximize employment.

According to former Chairman Alan Greenspan “Price stability is that state in which expected changes in the general price level do not effectively alter business or household decisions.”

A tolerable pace of inflation is not so high that households accelerate major purchases in anticipation that prices will outpace their incomes. And not so low that businesses fear deflation in periods of slack demand will make debt service too burdensome.

Central bankers in major advanced economies have settled on 2% inflation as a reasonable target.

In 2020, the Fed indicated it would tolerate periods above 2% to compensate for periods below that level, but recent experience indicates that the Fed is challenged to manage inflation down to 2% after letting it exceed that limited.

As price stability best encourages sound investment decisions, getting to 2% and staying there would best encourage healthy jobs growth and stronger equities performance in the long run.

To accomplish all this, the Fed Open Market Committee regulates access to credit by adjusting the federal funds rate, and encourages prudent household, business and investor decisions through forward guidance about anticipated policy changes.

After its eight rate setting meetings each year, the FOMC issues a consensus statement about its reasoning and every other meeting it publishes anonymously the individual forecasts of its 19 members for annual GDP growth, unemployment, inflation and fed funds rate.

Much happens between meetings—unexpected changes in jobs, inflation and GDP data—and the Fed repeatedly states that decisions will be based on incoming data.

That creates an obvious tension between forward guidance and ultimate FMOC decisions.

Financial markets watch closely members testimony, frequent speeches and public statements to discern how the consensus may be evolving and anticipate future interest rate decisions.

Unfortunately, all this speechmaking can get in the way of good policymaking.

At the September and November meetings, the FMOC cut the fed funds rate by half and quarter points. Mr. Powell and Committee members made clear that they felt the economy was on track to accomplishing 2% inflation and established the expectations that they would further cut interest rates.

That kind of talk seriously influences the direction of stock prices.

At the December 17-18 meeting, members of the FMOC raised their median forecast for consumer price inflation for 2025 to 2.5% from 2.1% in September.

Clearly, the consensus of the Committee was that inflation was headed in the wrong direction. Yet, they voted to lower interest rates another quarter point, so as not to disappoint investors who were still expecting a rate cut.

Catering to equity investors as opposed to pursuing the Fed’s stated goal of getting inflation to 2% is not what the Fed should be doing.

The problem is there is no one Fed voice other than the statement issued at the conclusion of meetings, and FMOC members disagree a lot.

The December forecasts for 2025 inflation range from 2.1% to 3.1% and for where the federal funds rate should settle once 2% inflation is accomplished from 2.4% to 3.9%.

The Fed’s credibility is damaged by raising its expectations for inflation yet moving policy in a contrary direction to avoid rattling stock prices.

Despite a full percentage point cut in the federal funds rate since September 18, the 2-year and 10-year Treasuries, which are influenced by expectations for future Fed policy, are not down but up about 0.7% and 1%. That indicates investors’ skepticism about the Fed getting inflation to 2% and more rate cuts.

FMOC Statements and Chairman Powell consistently remind that future Fed decisions will be governed by incoming data but that surely did not apply in December.

Examining recent inflation data, prices for goods, many of which are importantly determined by international markets where China and most of Europe are in a funk, have been falling but prices for services less shelter, which are largely determined by domestic demand and labor markets conditions, have been rising at an alarming pace—about 4.1%.

President Trump campaigned on curbs on immigration, tax cuts and tariffs. However far he goes, those will tighten labor markets, raise aggregate demand and make getting inflation down to 2% even tougher.

The Fed has initiated its quinquennial review of monetary policy strategy, tools and communications.

It should set a hard goal for inflation to be at or below 2%, publish FMOC forecasts for inflation and other economic indicators after each meeting, explain in greater detail its decision as to change or leave unchanged interest rates against recent data and those forecasts and do a lot less public speaking.

Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.