In terms of monetary policy, the message from senior Federal Reserve officials today was not to read too much into their pledge of keeping interest rates low for an “extended period”.
In separate speeches, Donald Kohn, the vice-chairman, and Narayana Kocherlakota, president of the Minneapolis Fed, made clear that the phrase could mean pretty much anything under the sun, since the timing of any policy tightening would be determined by the health of the economy.
“The committee will raise interest rates if economic conditions change appropriately – whether that’s in three weeks, three months, or three years,” Mr Kocherlakota told an audience in Wisconsin. Meanwhile, Mr Kohn made a similar point at a conference in Ottawa, Canada.
“Central banks cannot make unconditional interest rate commitments based only on a time dimension,” the Fed vice-chairman said.
In the absence of any European sovereign debt crisis, these comments may have been seen as marginally increasing the chances of an early rate hike by the Fed.
But with doubts still lingering about the health of the European banking system and potential spillover effects to the rest of the world, forecasters have on balance pushed back their expectations of the first tightening of US monetary policy.
It seems unlikely that Mr Kohn or Mr Kocherlakota did anything to reverse that.
