Ben Bernanke's Indianapolis speech on "Five Questions About the Federal Reserve and Monetary Policy" is mostly on the dull side, but it also features the clearest and best pure communications statement yet from the Fed chairman. He takes on Charles Evans' point about forward guidance and delivers with the correct answer:
In the category of communications policy, we also extended our estimate of how long we expect to keep the short-term interest rate at exceptionally low levels to at least mid-2015. That doesn't mean that we expect the economy to be weak through 2015. Rather, our message was that, so long as price stability is preserved, we will take care not to raise rates prematurely. Specifically, we expect that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economy strengthens. We hope that, by clarifying our expectations about future policy, we can provide individuals, families, businesses, and financial markets greater confidence about the Federal Reserve's commitment to promoting a sustainable recovery and that, as a result, they will become more willing to invest, hire and spend.
The message here is clear. If you were seriously considering putting a bunch of money into a long-term project like an apartment complex, Ben Bernanke wants you to know that today would be a great day to break ground. He's reassuring you that today's low interest rates aren't a sucker's game that are going to be yanked away at the first sign of price increases or the earliest spotting of a green shoot somewhere. Go forth and build.