Specifically, the Committee anticipates that exceptionally low levels for the federal funds rate will be appropriate “at least as long as the unemployment rate remains above 6–1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.”12 An important objective of these changes in forward guidance is to enhance the public’s understanding of the Committee’s policy strategy and its “reaction function” – namely, how the FOMC anticipates varying its federal funds rate target in response to evolving economic developments.
For example, the Committee’s initial, calendar-based guidance did not clearly convey the rationale for the specified date. In particular, when the Committee extended the calendar date, the public was left to infer whether the change reflected a deterioration in the Committee’s economic outlook or, instead, a decision to increase policy accommodation.