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Quick comment on Bill Dudley’s take on forward guidance

Published on June 24, 2026

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By

Gerard MacDonell

I will be brief because this is background stuff, and I assume most of you have access to Bloomberg. Also, I have few points of criticism to offer. I just think it is a good piece, correct. Link to Bloomberg piece HERE.

I particularly like Dudley’s point that forward guidance is appropriate only at the lower bound. The wording is a bit muddled. When Dudley says “this tool” he means the ability to cut the funds rate. And he strikes me as exactly right. I have long wondered why this idea is not more widely recognized. And I have long insisted that there is no guidance. Warsh himself has worried about forward guidance when there has been none. And Dudley correctly identifies why there has been none. So, maybe we could stop worrying about this non issue. Warsh does tend to make stuff up. If he keeps doing that, people are going to start noticing.

The distinction that Dudley draws between setting out a path for rates and explaining how the Fed might react to this or that development is also much to my taste. Giving the market a sense of the Fed’s reaction function would speed the implementation of monetary policy without aggravating Warsh’s concern about eliminating signals from the market. Very good point. I would add only that there are a lot of influences on the Fed, so pretending that they follow just two or three things — in the interest of simplicity — might not be a win. That scenario analysis stuff could be tricky.

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