While interest rate and balance sheet decisions require a formal FOMC committee vote, the Fed's communication strategy—including forward guidance and press conference frequency—is largely determined by the Chair's personal preference, not a committee consensus. This gives the Chair significant power to shape market narratives and operations.
Criticisms of the Fed's Summary of Economic Projections (SEPs) for inaccuracy miss their primary value for markets. The SEPs provide crucial insight into the committee's 'reaction function'—how it will likely adjust policy in response to economic data deviating from its baseline, which is more valuable than the forecast itself.
The Fed previously moved to press conferences after every meeting to avoid being 'boxed in,' as markets only expected major policy changes when a presser was scheduled. Reverting to a quarterly schedule could unintentionally reduce the Fed's flexibility to act decisively at the other four yearly meetings, especially on rate hikes.
The common assumption is that reduced Fed forward guidance increases uncertainty, leading to a higher term premium and bond yields. However, this creates volatility in both directions. While yields might rise in an inflationary environment, a lack of guidance could also cause them to fall sharply during a period of negative economic surprises.