Ellen Meade, who left the Federal Reserve in 2021 after a career spanning 25 years there, played a key role behind the scenes helping officials think about how they communicate policy. She worked with former Vice Chair Stanley Fischer and was a special advisor to former Vice Chair Richard Clarida as the the central bank developed a new framework around average inflation targeting, announced in 2020. She also advised Chair Jerome Powell when he was a governor serving on the FOMC’s communications subcommittee.
Meade, 64, will join Duke University on July 1 as a research professor in the department of economics. Bloomberg News interviewed her by phone on May 12 about the history of Fed communications and some of the current dilemmas. This transcript has been edited for brevity and clarity.
What are you going to be looking for in the minutes from the May meeting to be released this week?
As always, I’ll be looking for the discussion of near-term policy – the rate path, the expected economic conditions, and what policy makers want to see from the data before they slow the pace of tightening. I’m also expecting to see a fulsome discussion of financial conditions because policy makers seem to have guided the conversation away from neutral and toward financial conditions. The minutes may tell us they see the tightening in conditions this time around as greater than in earlier cycles. If that’s the case, then they may judge that they don't need to raise the funds rate by as much this time around.
Why do we sometimes hear different messages from the Federal Open Market Committee minutes, the statement, and the chair's press conference?
The FOMC minutes, post-meeting statement, and the chair’s press conference can send different messages and this reflects in part the nature of the communications vehicles. The minutes represent the very full-throated discussion at the meeting with many diverse perspectives on a range of issues. The meeting discussion is complex and the minutes are intended to give a picture of that complexity — not to give a central point of view. The minutes do this very well, I think, but are perhaps not the easiest of the Fed’s communications to understand.
The post-meeting statement is a concise statement of how the committee sees incoming information, the outlook for the economy, and the risks around that outlook; it lays out the policy action and any forward guidance. It is a consensus document that is ratified at the meeting.
The press conference was added in 2011 as a means of fleshing out the policy statement — providing context based on the discussion at the meeting — and explaining the Summary of Economic Projections. Because the press conference is live, you can from time to time have remarks that are misinterpreted, not fully explained or perhaps not quite what the chair intended to say.
There is a fourth very important communications vehicle that should be included: the Summary of Economic Projections, or SEP.
What’s the goal of the SEP? It isn’t really a consensus forecast.
Policy makers are shooting to get maximum employment and inflation back to target, or heading to their targets, by the end of the forecast horizon. What’s going on now is that this is the first time we have had the SEP with interest-rate projections in it as the economy is heading toward a slowing and possible recession. The March 2022 SEP showed an immaculate soft landing and this will be revised in June — but what will replace it? My bet is the medians will show a slowing in GDP growth below its longer-run rate and a rise in the unemployment rate, perhaps to its longer-run median rate or slightly above.
What do you think the committee’s biggest communication challenge is right now?
The whole discussion that is very fertile out there in the written press about ‘neutral,’ and real interest rates and what inflation rate you use to talk about neutral — I don’t think that particular discussion has been navigated as well as it could have been.
This idea of neutral is a tough one. In this current instance the FOMC could have benefited from two shorter-run concepts: one is around maximum employment and the other is around neutral.