Jerome Powell leans into greater openness
In one of his final speeches before a big policy meeting this month, Fed Chair Jerome Powell gave another hint that a rate cut is coming and stressed the importance of communicating frankly with the public.
Why it matters: The financial markets may have backed Powell into a corner to cut interest rates, but these days Main Street has his ear, too.
- In a novel series of public forums held the past few months, community leaders across the country have told Fed officials about the unevenness of the economic recovery.
- Since the latest "Fed Listens" event in Chicago, Powell has referenced this grassroots feedback in nearly every single public appearance to underscore the importance of extending the record-long economic recovery.
What he's saying:
Gone are the days when the Federal Reserve Chair could joke, as my predecessor Alan Greenspan did, "If I turn out to be particularly clear, you've probably misunderstood what I said." Central banks must speak to Main Street, as well as Wall Street, in ways we have not in the past, and Main Street is listening and engaged.— Powell's speech Tuesday at G7 Bretton Woods in Paris
The big picture: Powell, who is more plainspoken than his predecessors, has emphasized the importance of forthright communication since he took the helm of the Fed. He has doubled the number of post-policy meeting press conferences, and, under his direction, the Fed is for the first time publicly reviewing the way it communicates — among other things — to carry out its mandates.
- Powell has picked up on "the strong sense of transparency" carried out by Janet Yellen and Ben Bernanke, former Fed economist Jeffrey Bergstrand tells Axios.
- Yes, but: Powell hasn’t been without his own communication missteps. He "gives a little bit more color than his predecessors, and sometimes that can be risky," says Michael Reynolds of investment management firm Glenmede Trust. "There were slip-ups like, 'we're a long way from neutral.'"
The bottom line: In the midst of the longest expansion on record, the central bank is about to make a move that is normally done only in dire economic situations. This will leave the Fed with less flexibility if a recession does come — setting up a situation in which communication is more important than ever.
- "Powell has done a good job conveying they are pursuing a little bit of insurance," says Bergstrand.
Go deeper: The case for a Fed rate cut