BlockBeats news, October 27 — Nick Timiraos, known as the Fed’s "mouthpiece," wrote that when Warsh took office, it happened to coincide with the Federal Reserve’s shift to a tightening cycle; from historical experience, such periods are often precisely when "forward guidance" plays a key role.

People usually believe that "forward guidance" originated during the 2008-2009 period and the subsequent era of ultra-loose monetary policy, because at that time the Federal Reserve did rely heavily on this tool when interest rates hit the "zero lower bound." But in fact, the history of forward guidance can be traced back to 1999. At that time, Fed officials wanted to reverse the rate cuts made in 1998, while also trying to avoid repeating the mistake of 1994, when rate hikes caught the market off guard due to insufficient communication. Therefore, in May 1999, the Federal Reserve first tried issuing a policy statement after a meeting in which it kept interest rates unchanged.

Previously, the Federal Reserve only issued statements after meetings at which it adjusted interest rates. Six weeks later, it raised rates. Minutes from the May 1999 meeting show that officials already recognized a rate hike was highly likely and hoped to guide market expectations accordingly. They did not want the market to misinterpret their policy intentions.