> The Fed tells people what they would like the market to be… not what it is. Fundamentally, you can try to control expectations by feeding biased projections,

> The Fed tells people what they would like the market to be… not what it is. Fundamentally, you can try to control expectations by feeding biased projections, but you have to maintain a certain signal-to-noise ratio in doing so, or else the market will learn to ignore you. You can feed the market inaccurate projections only by spending down your accumulated credibility, which has to be bought back later with accurate projections. (This applies in real life, too. It takes trust to be believed, and it costs trust to mislead). "If a new inflation target is too ambitious, and the central bank fails to attain it, the central bank may lose its credibility, which may render less effective any other policies it pursues." [https://www.federalreserve.gov/econres/notes/feds-notes/raising-the-inflation-target-lessons-from-japan-20200108.htm https://www.federalreserve.gov/econres/notes/feds-notes/rais...] If the market has learned to ignore the Fed, then it becomes very costly for the Fed to achieve accurate projections and earn back its credibility, because it can't rely solely on influencing expectations to achieve its results. It is left only with backing up its bark with a real bite.