A Big Change Is Afoot. It’s Not Just a Rate Hike
The Fed's emphasis on data-driven decisions will overhaul its modus operandi. Is the world ready for a faster-moving institution?
A busy man.
Photographer: Brendan Smialowski/AFPBrace yourself for a big shift: Central banks are getting out of the crystal ball business. We are transitioning to a world where data, rather than detailed projections about the direction of monetary policy, is the key to understanding where interest rates are headed. This marks a significant departure from a guiding philosophy that's been around since at least the 2008 financial crash.
“We're going to be guided by the data,” Federal Reserve Chair Jerome Powell told reporters after the Federal Open Market Committee wrapped up a two-day meeting Wednesday. “In fact, what I'll say is that we're going to be led by the incoming data and the evolving outlook. We'll try to communicate as clearly as possible, moving steadily and transparently.”