AMERICA’S central bankers are in a tight spot. On September 18th the Federal Reserve must decide whether to begin to reduce (or, in the jargon, “taper”) the pace at which it supports the economy by printing money to buy bonds, from the current rate of $85 billion a month. Judging by its own earlier pronouncements, tapering is long overdue. In June the Fed’s chairman, Ben Bernanke, explained that he expected to have stopped buying bonds altogether when America’s unemployment rate fell to 7%. The jobless rate is now 7.3%, down from 8.1% a year ago. If the Fed plans to stop buying bonds by the time it hits 7%, it needs to start buying fewer of them fast. Ignoring the plan it laid out in June could compromise the credibility of its other promises, such as its commitment not to raise short-term interest rates until unemployment falls at least to 6.5%.

But the mere prospect of fewer bond purchases has already brought a sharp tightening in financial conditions. Since the taper talk began in late May, yields on ten-year treasury bonds have jumped almost a full percentage point, one of the biggest surges in decades, and a far bigger reaction than the central bankers expected. The shock waves have been felt across the globe, raising bond yields in Europe and sending emerging-market currencies plunging. And at home the economy, though perking up, is still less robust than it should be. America’s underlying inflation rate, at 1.7%, remains below the Fed’s target of 2%. The jobless rate is falling not primarily because of robust hiring but because fewer Americans are looking for work. Premature and forceful monetary tightening could choke off a still-fragile recovery.

Scylla, Charybdis and monetary policy

How should the Fed steer between these twin risks? The economy has improved enough to justify a small reduction in the pace of bond-buying—to, say, $75 billion a month. But it is not strong enough to withstand a sudden stop of such purchases, let alone a quicker return to raising short-term interest rates. The trouble is, that is exactly what the taper talk has led investors to expect. It is why long-term bond-yields have soared since May. And it is an impression the Fed must dispel on September 18th.

Doing so will require a change in attitude at the central bank. In the minds of many Fed officials a slower pace of bond-buying does not mean tighter monetary policy. The predominant view inside the organisation is that as long as the stock of bonds on the central bank’s balance-sheet keeps growing, monetary policy is getting looser. Slowing the pace at which that stock increases means monetary conditions loosen less quickly, but does not mean they tighten.

Financial markets have clearly concluded otherwise. Investors interpreted the promise of tapering as evidence of a big shift in the Fed’s priorities. That is partly because the taper talk was accompanied by a very public debate within the central bank about the downsides of bond-buying, particularly the risk of inflating bubbles in financial markets. And it is partly because the Fed provided an ambitious end point (ie, stopping bond purchases when the jobless rate reaches 7%) with little clarity about how it planned to get there, or how that goal weighed against other signs of weakness such as the uncomfortably low inflation rate.

The Fed needs to spell out its priorities and plans much more fully. First, it must leave no doubt that the priority is to support growth; that the pace of bond purchases is being reduced because the economy is ready for it; that the tapering will be cautious; and that if the recovery wanes the bond-buying will be stepped up again. Second, the Fed’s promises about its future plans should eschew mechanistic reliance on one economic indicator. If America’s jobless rate is falling but other measures of the economy’s health are weak, the central bank should explain it will err on the side of keeping policy loose for longer. The current pledge—to keep short-term interest rates close to zero until the jobless rate has fallen at least to 6.5%—should be bolstered with a promise not to raise short-term rates if inflation is well below its 2% target.

These changes would not guarantee that the Fed will be able to taper safely. But they would make its priorities clearer. That would be a big improvement on the confusion of the past three months.