Fed Members Agree Better Signalling Policy Needed

The Federal Reserve confused financial markets over scaling back its bond buying, four top officials said on Thursday, with one arguing the central bank should link tapering to drops in the jobless rate and another calling for a broad remake of strategy.

Fed Board Governor Jeremy Stein said he would have been comfortable with acting at the September 17-18 meeting, and the decision to keep buying bonds at an $85 billion monthly pace had been, for him, a “close call”.

“But whether we start in September or a bit later is not in itself the key issue – the difference in the overall amount of securities we buy will be modest,” he told a monetary policy conference in Frankfurt.

“What is much more important is doing everything we can to ensure that this difficult transition is implemented in as transparent and predictable a manner as possible. On this front, I think it is safe to say that there may be room for improvement,” he said in prepared remarks.

The Fed’s decision to stand pat on bond buying stunned financial markets, which had anticipated it would begin to slowly reduce the program, signaling the beginning of the end to an unprecedented five years of ultra-easy monetary policy.

via Reuters

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