Yellen’s challenge is to replace the threshold with guidance that’s less specific while also making it clear that rates won’t rise any time soon. If the Fed retreats to language that investors find vague and economic data comes in strong, traders are likely to move forward their estimate of when the central bank will raise rates, creating volatility in financial markets. [Link]
She should be vague about everything but clear about only one thing: that she would not raise interest rates, come what may. Volatility in financial markets is such a bad thing, you know. It should be avoided at all costs, you see. Nobody should take away the inalienable rights of investors not to pay for their decisions to buy high and sell low and no policymaker should even inadvertently (not that the Federal Reserve can be deemed guilty of it, on most occasions) think of deflating asset price bubbles.
This is one heck of a world that we live in. The Federal Reserve Open Market Committee meets next week.
Check out Tim Price on Mark Carney. As usual, it is priceless.
These are the people that some in India hold up as exemplars of transparency, open communication and clarity.