BloombergStanford University economist John Taylor (left) and New York Fed President William Dudley (right)Does the public understand the intentions and strategy of the Federal Reserve? William Dudley, the president of the New York Fed, argued Thursday at a panel discussion at The Brookings Institution that the U.S. central bank has been transparent. “I don’t really understand what’s unclear right now,” Dudley said. If the economy continues to grow above trend, the unemployment rate will continue to fall and give the Fed confidence that inflation will move higher, Dudley said. This will allow the U.S. central bank to begin to raise interest rates, Dudley said. Stanford University economist John Taylor, a well-known expert on monetary policy, who was on the panel with Dudley, shot back: “Are you kidding? No one knows what you’re doing.” He noted economists split 50-50 about whether the Fed would tighten in September. It would be better if 80% got the policy direction right. Taylor said the Fed officials are talking all the time and just confusing things. “We don’t know all the reasons you make decisions,” Taylor said. Taylor said the Fed should set a simple policy rule, similar to one he developed in the 1990s, which would lay out a clearly-defined strategy. Then the markets would know what the Fed was going to do without any speeches. Dudley argued against any rule, noting that the world is complex and ever-changing. “I don’t believe that any prescriptive rule...can take the place of a monetary policy framework that incorporates the Fed’s collective assessment of a large number of factors that impact the economic outlook,” he said. Dudley admitted the Fed hadn’t been doing a good job helping the public understand the central bank would engineer a rate hike by the end of the year. This is because “there are different views on whether the economy was going to perform in a way consistent with lifting off,” he said. This is a “realistic” disagreement because the economy is now growing slightly above trend and there are signs the economy is slowing. “It is reasonable that slight differences in the forecast are going to lead to differences in people’s views on the appropriate timing of liftoff,” he said. He noted that September unemployment was disappointing and retail sales were on the soft side. “I don’t want to make too much of that,” Dudley said. “I see the domestic economy performing very well.” Asked if the Fed would hike rates in December, Dudley replied: “I wish I knew the answer to that.” He said there will be a lot of data between now and the Fed meeting on Dec. 15-16. “It would be crazy to presume what the data is going to be when we can actually observe it,” he said. More from MarketWatch