Earlier today, I indicated that comments yesterday by Fed President Dennis Lockhart clearly indicated that the Fed was poised to shift away from quantitative easing and toward forward guidance to guide future Fed monetary policy. But Lockhart gave a speech today which further signalled this policy shift. Neither time did Lockhart explain why this shift has occurred, leaving us to speculate on what is going on at the Fed.
Tim Duy spotted the key language in Lockhart’s speech today and rightly raised the question as to why the shift is taking place.
Here’s what Lockhart said:
Monetary policy is highly accommodative—as central bankers say. The FOMC is currently using two tools to maintain the desired degree of monetary accommodation—the policy interest rate and bond purchases. Importan...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.