Bloomberg Surveillance · Friday, September 11, 2026
David Kelly argues that the Federal Reserve's lack of clear forward guidance on its reaction function is increasing long-term rates by adding a 'Fed risk premium' to the market. He believes that providing a framework for how rate decisions are made, even without specific future projections, would reduce uncertainty and help lower long-term rates.
“The Federal Reserve, and I hope the task force realizes this, the Federal Reserve should at least provide a framework of forward guidance. They don't have to say where rates are going to go, but sorry, not forward guidance so much as the reaction function. They've got to say, if the economy goes this way, that's how we're going to move rates.”
“That reduces overall uncertainty. That's the easiest thing they can do. That won't cost anything to bring down long-term rates a bit.”