IMF chief economist says Fed reduction in rate guidance is ‘entirely appropriate’

The IMF’s chief economist, Pierre-Olivier Gourinchas, has endorsed Federal Reserve Chair Kevin Warsh’s move to reduce explicit forward guidance on monetary policy. Gourinchas stated that overly rigid guidance proved costly when inflation surged, as it tied the Fed’s hands. While acknowledging the need for some long-term market guidance, he believes explicit, strong commitments are no longer tenable, suggesting a more flexible approach is appropriate for central banks.