Reuters
Fed guidance on rates following liftoff may remain foggy
The U.S. Federal Reserve clearly telegraphed a March interest rate hike after its meeting this week but the pace of what follows may remain clouded as officials wait to see how inflation, the coronavirus pandemic, and the economy overall react in coming months. In that environment, former Fed officials said, it may be hard – even unwise – for the Fed to tie itself to the sort of forward-looking promises employed in the past to communicate its plans, with words like “gradual” being used in Fed policy statements to relay expectations of hikes every quarter. With so much unknown about where prices, the pandemic and the economy are heading, “I don’t see how they can say they are going to be ‘patient’ or they are going to be ‘gradual’ or they are going to move ‘deliberately’ or whatever word you like because it is too easy to imagine outcomes where it is wrong almost right away,” said William English, a professor at the Yale School of Management who ran the Fed’s Monetary Affairs Division responsible for drafting policy statements.
