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Talking About Outcomes

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  • Tom Barkin

Abstract

In an era of low interest rates, forward guidance has become a crucial tool in the Fed’s toolbox. The Fed’s first forward guidance in the early 2000s was couched in general terms. During the Great Recession, the Fed introduced date-based forward guidance. While markets and reporters may prefer dates, tying monetary policy to the calendar in times of great uncertainty is asking for Fed credibility to be put on the line. The Fed now issues outcome-based forward guidance, making it clear that monetary policy is driven by economic conditions, not dates. Regarding the Fed’s asset purchases today, we have updated our guidance to reflect changing economic conditions and signal policy changes in advance.

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  • Tom Barkin, 2021. "Talking About Outcomes," Speech 101291, Federal Reserve Bank of Richmond.
    • Handle: RePEc:fip:r00034:101291
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    File URL: https://www.richmondfed.org/press_room/speeches/thomas_i_barkin/2021/barkin_speech_20211014
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