A failure to communicate: Fed 'guidance' fails early test | Reuters

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.