In October 2012, the Fed issued what came to be called a “pledge” to keep its target interest rate near zero through mid-2015. The market immediately reacted as the Fed wanted, centering expectations on a rate hike in mid-2015.
At its next meeting, the Fed abandoned date-based guidance in favor of data-based guidance: a pledge to keep rates near zero until the unemployment rate fell below 6.5%. The Fed emphasized, however, that the two pledges were consistent, as it didn’t expect unemployment to fall below that level until mid-2015. Read more »