Kashkari: Fed forward guidance can backfire if it's wrong

Minneapolis Fed President Kashkari

• Forward guidance can undercut the Fed's message if it's consistently wrong
• Says he has mixed feelings on the use of forward guidance
• Paying interest on reserves is a key tool for Fed to implement monetary policy
• Inefficient allocation of capital could be factor in low productivity growth

He's absolutely right. All the dot plots have done is underscore that the people at the FOMC are terrible at forecasting. So now, even with a Fed statement that basically promises a Fed hike in December or sooner, you have the market giving it just a 57.5% chance.