During the presser following the March FOMC meeting, Ben Bernanke made two comments suggesting that its communications policy regarding asset purchases would shift in the direction of its policy for interest rates.
With apologies for rehashing lines from an earlier post, in case anybody would have noticed…
First, in response to a question from the FT’s Robin Harding, Bernanke said that a more-flexible approach to asset purchases would be sensible (emphasis mine):
We maintain full speed ahead until we hit a certain target, and then, you know, we stop. That would be, I think, very difficult for the markets to understand, to anticipate. We think it makes more sense to have our policy variable, which is the rate of flow of purchases, respond in a more continuous or sensitive way to changes in the outlook. …
… when we see that the condition or the situation has changed in a meaningful way, then we may well adjust the pace of purchases in order to keep the level of accommodation consistent with the outlook, and, secondly, to help provide the markets with some sense of progress—how much progress is being made so that it can make better judgments.
And later, in response to a question from the NYT’s Binyamin Appelbaum, Bernanke said that numerical guidance would indeed be more effective than tying purchases to the vague notion of “substantially”:
I mean, there’s a wide range of views about how effective asset purchases are in terms of moving the economy. So, as we move forward in time, we’ll be learning about how effective the policy is, and what costs and risks there may be associated with it.
And, as we do that, perhaps we will be able to give more-explicit guidance. And I agree with you 100 percent that that would be more effective if we could give numerical guidance.
I’m really just guessing here, but I interpreted today’s statement as possibly softening the ground for just such a move.
(Specifically, the FOMC added the line that it is “prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes”.)
As usual we’ll find out more when the minutes are released, but there’s a good chance that a substantial part of the meeting was spent discussing the possibility of a condition-sensitive policy with numerical guidance.