Fed's Guidance Questioned As Market Misreads Signals
Federal Reserve officials created new uncertainty about how much farther they will push their easy-money policies--and new questions about how effective they are at communicating their thinking--with the decision to stand pat on the pace of their bond purchases for now.</br></br>The Fed on Wednesday went beyond merely deciding to keep buying the $85 billion a month of mortgage-backed securities and U.S. Treasurys that it had been telegraphing for months it might start winding down. In the news conference after a two-day policy meeting, Fed Chairman Ben Bernanke also seemed to walk away from some of the guidance he had given in June on how the bond-buying program would play out over the next year, making it even less clear when the program will end.</br></br>Mr. Bernanke said Wednesday that he thought the decision not to begin pulling back on bond purchases was right given a weaker economy than the Fed expected a few months ago and one facing new threats from a fiscal showdown in Washington. He also said the Fed might still proceed with a pullback in the months ahead if the economy cooperates.</br></br>In his defense, Mr. Bernanke said that he has never said the Fed would start the pullback in September and that the decision always depended on the economy's vigor. "I don't recall stating that we would do any particular thing in this meeting," Mr. Bernanke said at the news conference.</br></br>Yet some investors and analysts said the Fed's action was the latest in a series of communications missteps, demonstrated by the fact that numerous surveys showed investors broadly expected the central bank to move in September.