Fed Leery Guidance Changes Might Be Misread
Federal Reserve officials discussed altering their guidance on the likely path of interest rates at their September meeting, but decided against making any changes because of concerns they might be misinterpreted, minutes of the meeting showed Wednesday.Back in 2010 I said:
The Fed statement released three weeks after the meeting repeated that officials expected they would keep short-term interest rates near zero for a “considerable time” after the end of their bond-buying program. The minutes said several officials objected to the phrase because they thought it suggested the central bank would wait longer to raise interest rates than they thought likely.
In addition, “the concern was raised” that the current phrasing might be misinterpreted as linking the likely first rate increase to a particular calendar date, rather than clarifying that it would depend on the economic data, the minutes said.
Philadelphia Fed President Charles Plosser and Dallas Fed President Richard Fisher both voted against the statement because of objections to the wording of the guidance.
Other officials, however, noted other language in the statement emphasizes that their decision on when to raise rates will depend on what the data show about the health of the recovery.
In the end, policy makers decided to keep the language in the September statement—in part for fear of creating turbulence in financial markets. A number of officials noted that changes to the guidance “might be misinterpreted as a signal of a fundamental shift in the stance of policy that could result in an unintended tightening of financial conditions,” the minutes said....MORE
Students of rhetoric would do well to study the March 23, 1955 press conference of President Eisenhower....That advice still stands.
