Alan Greenspan famously said he’d mastered the art of mumbling “with great incoherence” as Federal Reserve chairman. Jerome Powell is attempting the opposite approach.
“Because monetary policy affects everyone, I want to start with a plain English summary of how the economy is doing, what my colleagues and I at the Federal Reserve are trying to do and why,” Powell, who took the helm at the U.S. central bank in February, said at the outset of his June post-meeting press conference on Wednesday.
That bid for a broader audience is the latest step in an evolution: Fed leaders have been striving toward greater transparency for years, and now Powell is pushing democratization a step further.
He’s a non-economist who uses concise, simple terms -- growth is “great” and “there’s a lot to like” about low unemployment. He downplays the importance of modeled relationships and emphasizes the data in hand. He’s adding more press conferences, and the Federal Open Market Committee has already shortened its post-meeting statement under his watch.
The shift toward plain-spokenness comes as the Fed approaches a treacherous policy juncture.
Starting next year, policy makers expect to lift rates past their neutral level, so that monetary policy will stop boosting the economy and start holding it back. Running tight policy has been a public relations headache for the Fed throughout its history, and communicating a rationale early, optimistically, and in a way the public can understand could help to contain any backlash.
“The Federal Reserve has the incredible challenge that they have to communicate that wage growth can actually be too high, and that the unemployment rate can be too low,” said Torsten Slok, chief international economist at Deutsche Bank in New York.
Sign of Times
In some ways, Powell’s increased transparency fits his time. He was appointed by President Donald Trump, who is in constant, direct communication with the public that elected him after warming to his blunt style. Like Trump, Powell accentuates the positive while also acknowledging Americans’ economic pain.
“Most people who want a job can find one,” he said Wednesday. “We’re well aware that there are pockets out there of people who have not felt” the recovery, “but broadly speaking, it’s a good economy.”
Powell’s simple speech is enabled by the economic backdrop. With unemployment low, inflation contained near the Fed’s 2 percent goal, and growth pumped up on fiscal stimulus, it’s safe to give the economy an A grade.