At the ECB’s July meeting, Christine Lagarde jettisoned forward guidance and Jerome Powell followed suit the following week. I talked about this at length in “ ‘Wrong’ Trades And Bad Bets .” The demise of forward guidance is designed to inject volatility or, at the least, it’s tantamount to removing a powerful vol suppressant. If you disavow forward guidance and risk assets rally, something’s gone awry. At the risk of lapsing into colloquialisms, this would be much easier for the Fed if they’d just shut up. On Saturday, Michelle Bowman (who doesn’t speak very often), acknowledged that forward guidance was partly to blame for the Fed’s delayed reaction to rising inflation.

Source: New York Times August 07, 2022 19:29 UTC