Svmuu News Federal Reserve Waller presented “two points of consideration” regarding the monetary policy transmission mechanism, emphasizing that the effectiveness of policy depends on initial conditions and the manner in which forward guidance is used: The first point is that “initial conditions are crucial,” and monetary policy assessments should be based on the current state of the economy rather than historical averages; the second point concerns the role of “forward guidance.”He believes that forward guidance can, under certain circumstances, accelerate policy transmission by influencing market expectations to alter financial conditions in advance; however, if it is too rigid or lacks flexibility, it may actually weaken policy effectiveness or even delay necessary policy adjustments.
Waller emphasized that when multiple economic scenarios exist, one cannot simply use an “average path” as the basis for policy guidance; policymakers must maintain adaptability and flexibility to respond to different scenarios.