St. Louis Fed President James Bullard has also argued for holding a press conference after every FOMC meeting, instead of every second one as is currently the case, though Yellen hasn’t so far shown any inclination to move in that direction.
Yellen and her colleagues have backed away from hinting a rate hike would be considered in June after the U.S. added just 38,000 jobs in May, the weakest in almost six years. Those hoping June’s statement will clarify what to expect in July shouldn’t hold their breath.
“I know market participants really want to know exactly what is going to happen,” Yellen said Monday. “There is, as I have said about 18 times, no pre-set plan.”
For an analysis on Yellen’s latest remarks on Fed policy, click here.
Investors see no probability of a June move and a 20 percent likelihood of a hike in July, according to pricing in federal funds futures contracts.
The Fed “is struggling to find the right combination of written and spoken signals that signal intentions but not pre-commitment,” said Ward McCarthy, chief financial economist at Jefferies LLC in New York.
April’s statement miscue wasn’t the Fed’s first. The FOMC also confused investors last year with “dovishness at the September meeting that had to be corrected at the October meeting,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York.
These lapses recall the so-called taper tantrum in May 2013 when then-Fed Chair Ben Bernanke jarred bond investors with plans to scale back asset purchases.
The Fed’s own poor forecasting record may be making matters worse. In particular its quarterly economic forecasts, including the so-called dot plot projection of what officials view as the likely pace of future fed rate hikes, have attracted critics.
“The FOMC has fairly consistently signaled a tighter path of policy than the markets expected, and the markets turned out to be right,” said Jonathan Wright, an economics professor at Johns Hopkins University in Baltimore. “Communications have tended to err on the side of being more hawkish than what is ultimately done.”