A failure to communicate: Fed 'guidance' fails early test
| Reuters
Rather than heed Fed Chairman Ben Bernanke's
reassurance that the end of quantitative easing would not presage an
imminent rise in interest rates, the bond market pushed borrowing costs
sharply higher, a sign the central bank's reliance on "forward guidance"
may not be working as intended.
The
policy blunder was made evident by the unusually large chorus of Fed
speakers who made the rounds to reassure markets, eventually with some
success in stabilizing things. Fed officials believed that by
telegraphing their intentions, they could convince investors to separate
two different policy levers - interest rates and asset purchases.
No comments:
Post a Comment