FRANKFURT (Reuters) - When the U.S. Federal Reserve delayed its highly anticipated reduction in monetary stimulus last week, it did not try to surprise the market, Fed Governor Jeremy Stein said on Thursday.
“Nobody was doing something to intentionally surprise the market. It was exactly the opposite. The most important thing is to get the policy right,” he said at a conference at the Goethe University in Frankfurt.
His comments were echoed by the vice president of the European Central Bank, Vitor Constancio, who said: “It is not the goal of policy to surprise markets. ... From time to time you have to demonstrate that you are independent from markets.”
A firm majority of economists in a Reuters poll said the Fed failed to communicate policy clearly in the months leading to last week Wednesday’s surprise decision not to reduce its $85 billion monthly bond-buying policy.
Talking about central banks providing forward guidance on their future policy stance, Stein said pinning the guidance to clear economic indicators would give it more power.
“I don’t think you are bound by it in any legal sense, but you probably put more of your capital on line, so in that sense it has more force,” Stein said.
Reporting by Eva Taylor, Edward Taylor and Sakari Suoninen; editing by Ron Askew