The US Federal Reserve’s forward guidance on future interest rates has come up for debate after a stream of central bank officials declared the current wording needs to change.
In the past few days, officials from every part of the rate-setting Federal Open Market Committee – hawks and doves, regional presidents and Washington governors – have called for new language.
Their remarks could mean a move at the September FOMC meeting in 10 days, although there is little consensus yet on new wording, so a shift might have to wait until next month.
A particular issue is the Fed’s guidance of low rates for a”considerable time” after it stops buying assets in October. A chunk of the FOMC feels that is a dangerous hostage to fortune, after steady economic progress that could yet require rate rises early next year.
“Significant parts of the FOMC statement need to change,” said Jerome Powell, a Fed governor, in a question-and-answer session on Thursday evening. “I believe it is . . . time for the Committee to reformulate its forward guidance,” said Loretta Mester, president of the Cleveland Fed, in a speech earlier the same day.
Mr Powell and Ms Mester are two of the four members of a new Fed sub-committee on communications policy. Their concern about forward guidance is reflected across the spectrum of hawks and doves on the FOMC.