Bloomberg Surveillance · Friday, July 31, 2026
Bill Dudley clarifies that his criticism of the Fed is not against reducing forward guidance, but rather the lack of clarity on the Fed's monetary policy reaction function. He argues that while forward guidance is unnecessary outside of the zero lower bound, understanding how the Fed will react to incoming data is crucial for market pricing and reducing uncertainty.
“You're not against reducing forward guidance. This is important. I think that the complaints about the people doing the complaining often or around the idea that somehow we still want our hands being helled, that we want to hold on to the post GFC communication architecture, and Bill, I don't think that's what your criticism is about, no.”
“But that doesn't mean you don't want to know what the Fed's monetary policy reaction function is. And I think that's the real problem Abortion and it's comments is conflating the two and they're very very different.”
“If I don't understand how the FED reeser is going to react to incoming information, I can't price financial markets correctly. And it's also creating a lot of uncertainty about what policy is going to be in the future.”