Federal Reserve Chairman Kevin Warsh used his Jackson Hole speech Friday to expand on a longstanding critique of forward guidance, arguing that the central bank should rely less on efforts to tell markets where policy is headed and more on a set of principles that leave officials free to respond to changing economic conditions.
\n\nWarsh has argued for years that central banks can damage decision-making by saying too much about future policy. On Friday, marking his 100th day as Fed chairman, he made clear that view will shape how he intends to run the central bank.
\n\n“You might know about my long-time discomfort with early pronouncements of future policy decisions,” Warsh said. “I much prefer another path.”
\n\nForward guidance became an important part of Fed policy during the 2008 financial crisis, when Warsh himself was a governor. He said Friday that it had been useful in that emergency but had since “overstayed its welcome.”
\n\n“In normal times, the role of forward guidance should be limited and circumscribed,” Warsh said. Oversharing internal deliberations and making quasi-commitments about future interest-rate decisions, he argued, can mislead businesses and investors while restricting the Fed’s freedom to change course when circumstances shift.
\n\nThe argument builds…
Original source: https://www.breitbart.com/economy/
