One of the post-crisis experiments in monetary policy was forward guidance and long lead time announcements to reassure markets and reduce any turmoil from policy adjustments.
The experiment was successful. Now it seems that the Fed believes the markets are sufficiently stable that the early warnings and guidance are not necessary. Forward guidance was also risky: had the Fed ever needed to change policy after it had promised not to, it would have lost credibility and trust from the markets. Eliminating forward guidance is a return to the pre-crisis normality — more work for analysts and more disagreements among forecasters.
This article was written by David Blitzer, chairman of the index committee, S&P Dow Jones Indices.
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