Greg Ip thinks so. In today's Wall Street Journal -- here's the link if you have an online subscription -- he writes:
For almost two years the Fed has been unusually clear -- by central-bank standards -- about its plans for moving short-term interest rates...
This predictability removed a lot of the guesswork for investors, and, some analysts argue, has emboldened them to buy long-term bonds...
But the Fed's predictability, first adopted as part of its strategy to reduce the risk of destructive deflation, will end at some point. As the Fed becomes less certain about its next moves, officials are likely to remove the word "measured" from the statement they issue after each of their meetings. As the Fed becomes less certain about its next moves, officials are likely to remove the word "measured" from the statement they issue after each of their meetings. Mr. Greenspan said as much two weeks ago, though giving no hint when it would happen: "We're not going to have the same statement in perpetuity."
A return to limited guidance on the direction or pace of Fed interest-rate moves could send long-term interest rates in the bond market sharply higher.
But is it the central bankers that are becoming more unpredictable, or is it the world they operate in? The central bankers seem to think the latter.
But the Fed's willingness to forecast its interest-rate plans reflected an unusual confidence in those plans resulting from unique, and likely temporary, circumstances. Interest rates were exceptionally low, so they obviously had to rise. But the risk of inflation also was low, so the pace could be leisurely. "The crucial difference between now and in the past is an extraordinary productivity acceleration," Mr. Greenspan said last April. "That means that the price pressures are not anywhere near where they would be under normal circumstances. ... It means that you can go in a much more measured pace."...
"The period we've been through has been unusual enough that we knew the direction and that we had some ways to go, so it was easier to offer that kind of guidance," Jack Guynn, president of the Federal Reserve Bank of Atlanta, said in a recent interview. But a point will come when "it's not quite as clear how much more we need to do and how quickly we need to do it."