Hilsenrath: Guess What?

This morning at 6:27 a.m., Jon Hilsenrath posted a WSJ article titled, “Fed Leaves Markets Guessing.” This excerpt gives the gist:

The comments, given at a congressional hearing Wednesday, gave markets a dose of clarity for a few hours, though a subsequent release of minutes from the Fed's April 30-May 1 Fed policy meeting added to investor anxiety about the Fed's plans. The minutes disclosed that some officials were prepared to start pulling back the program as early as the Fed's next meeting in June, though the group as a whole, too, expressed hesitance.

Fed officials have struggled to fine-tune their communication strategy while they are struggling to fine-time their QE policy. So far, the results have been confusing. The noise-to-signal ratio coming out of the Fed has been rising. Here’s more from Hilsenrath’s article:

The next step by the Fed could be especially tricky. One worry at the central bank is that a single small step to shrink the size of the program could be interpreted by investors as the first in a larger move to end it altogether. [Yesterday,] Mr. Bernanke sought to dispel that view, part of a broader effort by Fed officials to manage market expectations.

If the Fed takes one step to reduce the bond buying, it won't mean the Fed is "automatically aiming towards a complete wind-down," Mr. Bernanke said. "Rather we would be looking beyond that to seeing how the economy evolves and we could either raise or lower our pace of purchases going forward. Again that is dependent on the data," he said.