00:00You might know about my long-time discomfort with early pronouncements of future policy decisions.
00:07I much prefer another path, and now will make the case for it.
00:13Transparency in communications about future policy decisions is not an end unto itself.
00:20Communications must be in service to the Fed's paramount responsibility.
00:25And what is that that's getting policy right?
00:30Forward guidance as a regular practice was adopted by my colleagues and me during the global financial crisis.
00:37It was essential at the time, and we introduced it with much fanfare.
00:43But as with other legacies of crises past, I believe the practice has outstayed its welcome.
00:51In normal times, the role of forward guidance should be limited and circumscribed.
00:56Otherwise, it risks creating ambiguity in the name of clarity.
01:02Oversharing policy deliberations and over committing to future decisions can lead markets, businesses, and households astray.
01:13And I believe when policymakers make quasi-commitments on interest rates throughout the cycle,
01:19We inhibit our own freedom to make the right calls when it's time to decide.
01:26To get policy right, we also need to get the relationship right between the central bank and financial markets.
01:33The markets, excuse me, the Fed needs clear market signals as unfiltered as possible.
01:40From market internals, from the level and change in asset prices across sectors,
01:47the prices and trading volumes of treasury securities,
01:52the foreign exchange value of the dollar,
01:55the cost and availability of credit,
01:58a broad set of commodity prices.
02:00For more information, please visit www.fema.org.
Commenti