Powell Puts His Stamp on the Fed

Powell Puts His Stamp on the Fed

Jerome Powell

gave Federal Reserve communications a makeover Wednesday, one way he is putting his stamp on the central bank early in his term as chairman without departing from his predecessors’ policies.

Mr. Powell, a former financier and the Fed’s first leader in decades without a Ph.D. in economics, showed how he plans to remodel the central bank’s messaging at his press conference: Deliver short answers. Use simple language. And double the frequency of such public events next year.

“I want to start with a plain English summary of how the economy is doing,” he said in his opening statement. “The economy is doing very well.”

He also simplified and shortened the Fed’s postmeeting policy statement, which had grown wordier over the years as his predecessors sought to explain complex new policies to energize a fitful economic recovery.

It was a big change for an institution dominated by cautious academics who measure most things out to several decimal places.

“It showed Jay Powell is firmly in charge,” said

Vincent Reinhart,

 chief economist of Standish Mellon and former director of the Fed’s monetary policy division.

Mr. Powell’s style differed in three clear ways from those of Chairwoman

Janet Yellen,

who stepped down in February, and her predecessor

Ben Bernanke.

To start. Mr. Powell is more concise. His press conference answers were so crisp, he finished the session in less than the allotted hour, just as he had at his first such meeting in March.

The briefer Fed statement also reflects the shift to a healthier economy and more traditional approach to policy, which are easier to explain.

Second, he prefers more direct language. He translates jargon.

“The decision you see today is another sign that the U.S. economy is in great shape,” he said in response to a question about the statement changes and the Fed’s so-called dot plot, a chart displaying officials’ interest-rate projections.

He didn’t answer every question posed in elaborate detail, but he didn’t shy away from even some esoteric topics, such as banking rules for marijuana businesses. Given competing state and federal laws, “it would be great if that could be clarified,” he said.

Finally, he promised to communicate more often with the public by holding eight press conferences a year, up from four.

“I hope to foster a public conversation,” he said.

Mr. Bernanke began news conferences in 2011 at every other meeting, a tradition continued by Ms. Yellen. It was a radical departure at the time: His predecessor,

Alan Greenspan,

gave just one on-the-record television interview during his 19-year tenure as Fed chief.

Mr. Powell’s move will give the Fed greater policy flexibility. Under Ms. Yellen and Mr. Bernanke, the central bank had fallen into the pattern of making major policy announcements only at meetings followed by news conferences, so the chair could explain them in more detail. But this had lulled investors into believing Fed meetings without press conferences wouldn’t result in any action.

Fed officials will be able to move at any meeting next year and know Mr. Powell will be scheduled to elaborate later. This could be useful at a time when they might want to pick up or slow down the pace of interest-rate increases in response to changes in the economy.

“I give it two thumbs-up,”

Seth Carpenter,

chief U.S. economist at UBS and a former Fed official, said of Mr. Powell’s decision. “And if I had more hands, I’d give it more thumbs-up.”

Mr. Powell also stood comfortably behind a lectern during the 50-minute press briefing, rather than following his predecessors’ practice of speaking from a chair behind a desk.

The central bank glasnost over the past decade represents a U-turn from how policy was conducted a generation ago. Central bankers once treated their craft as something best practiced out of public view, taking a page from Montagu Norman, the Bank of England’s chief from 1920 to 1944, who invoked a motto, “Never explain, never excuse.”

For all these stylistic differences, Mr. Powell has stuck to Ms. Yellen’s policy path of gradually raising interest rates.

Officials voted Wednesday to lift their benchmark rate for the seventh time since December 2015, to a range between 1.75% and 2%, and penciled in two more increases this year to keep the economy on an even keel.

Policy continuity comes as no surprise to Fed watchers who are familiar with Mr. Powell’s views. But it is notable considering how other regulatory agencies under the Trump administration have had made sharp breaks with the policies of the Obama administration.

Mr. Powell, who served as a Fed governor alongside both Mr. Bernanke and Ms. Yellen, on Wednesday defended the Yellen-era Fed approach from criticism that it had raised rates too slowly.

“I like the results so far,” he said Wednesday. “Patience has borne fruit…We had a lot of encouragement to go much faster, and I’m really glad we didn’t.”

Write to Nick Timiraos at nick.timiraos@wsj.com

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