A Fed volatility injection

The Federal Reserve's decision to tie guidance to data rather than the calendar enables better prediction of the bank's movements. But it will also increase market volatility.

The Federal Reserve, in its 12 December policy release, made a significant change to its communication policy that is likely to have the unintended consequence of greater market volatility. Prior to this meeting, the Fed used calendar guidance – stating it "anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015.”


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