They judged that this response would influence expectations and thus longer-term interest rates, and would help the public understand the Committee’s intentions.23 The change that was proposed, and eventually adopted, replaced the phrase that characterized how long the Committee expected the federal funds rate would remain low--“for an extended period”--with “at least through mid-2013.” As shown in figure 4, this subtle but important change in language in the FOMC’s post-meeting statement induced a decline in interest rates across the term structure.
How was the decision to change the forward-guidance language reached? Ultimately, the decision required the adept leadership of Chairman Ben Bernanke, lengthy deliberations of Board members and Reserve Bank presidents, and staff briefings and forecasts.