By reducing uncertainty, Fed officials can actually improve the effectiveness of monetary policy.  Three areas are critical: First, officials can update the baseline outlook and risks to it, and how they will react to changes.  Second, they can map out their exit game plan, continuing to identify the tools they will use and the sequence for deploying them.  Third, they can say what they do and do not know about the exit process, given that the Fed and market participants are in uncharted waters. 

Outlook risks.  As noted in the minutes from the September FOMC meeting, the Fed's baseline outlook has probably improved since late June, when the central tendency for growth over the four quarters of 2010 was a range of 2.1-3.3%, and the Fed projected core...