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Caroline Baum: The Fed admits its road map is a fuzzy blur

Once upon a time, central bankers touted forward guidance as an invaluable policy tool. With interest rates hovering close to zero in the world’s advanced economies, policy makers used talk therapy to their advantage. Tell the public — the financial markets, really — your objective and how you plan to achieve it, and they will do the work for you by incorporating tomorrow’s expectations into today’s prices.

That’s all well and good when policy makers know what they plan to do and when they plan to do it. During the extended period of near-zero interest rates from December 2008 to December 2015, the Federal Reserve used its pledge to keep short-term interest rates low for an extended period to prevent long-term interest rates from rising.

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