The fed’s current policy appears to be exactly that. Having gone about as far as they dare with actions, they’re going to work on communications as a means to control expectations and the actions which flow from expectations.

In particular, they need to keep inflation expectations “anchored” in the face of common experience to the contrary, and prevent the moral hazard arising from their past actions from engendering a new era of systemically risky behavior in the financial system.

The Bank of Canada is getting in on the anti-inflation act too. They left rates alone today, when the market had expected either a 25 or 50 bps cut. 2-year bonds in Canada are getting killed today.

Steve