The case for strong and silent central banks

Late on june 13th, a curious article appeared in the Wall Street Journal. It said that the Federal Reserve was “likely to consider” raising interest rates by 0.75 percentage points at its meeting on June 15th. The article was unusually silent about its sources. And it proved uncannily prescient. Two days later the Fed did indeed raise interest rates by that amount, its biggest increase in 28 years. Many investors believe the central bank had used the press to warn financial markets about what it would do in advance (albeit not very far in advance). That would make the Journal story an unconventional example of “forward guidance”.