Via Bloomberg’s Richard Breslow,
Fed’s Powell Missed a Tremendous Opportunity
What a waste of a couple of good opportunities. Fed Chairman Jerome Powell gave a speech late Friday after the non-farm payrolls report and an extensive interview from earlier in the week was aired Sunday evening. Typical performances from which nothing new was learned. Sadly, I suspect, because there is nothing new to tell.
The headlines on the jobs report were still flashing by when the debate began about whether it was indeed weak or stronger than it looked. One data point does not a thorough demonstration of an economy make, but what a great opportunity it would have been to take a major release, one that was full of ambiguity, and tell us just how the Fed dissects and uses such information. It was a teachable moment. He could have used it to set himself apart from his predecessors and do more to reach the public than any dozen speeches at rubber-chicken luncheons.
They say they want the markets, and citizenry, to understand their reaction functions. Clear and open communication, I guess, is the goal, as long as it doesn’t necessitate they stray from their theoretical and academic comfort zones. Citing global tailwinds is so much easier than parsing the finer points of a number. Counseling patience would be a lot more palatable, if it didn’t increasingly come across as indecision. It’s become the central bank version of, “We’ll see.” And that comes with a note of condescension.
The 60-Minutes appearance should also have been an opportunity to explain to a broader audience how the Fed really operates. Instead it fell into the, “See I’m not so scary after all” category. It just doesn’t advance the ball to learn that if we didn’t have an opioid epidemic and the education system was more functional then the country would be better off.
The most important issue he didn’t address was when the subject of income and wealth inequality came up. It is the public’s greatest source of distrust and dislike of the institution. There were probably very few people listening that didn’t want to know what he intended to do about it. Especially as it is hard to argue that Fed policies, whether necessary or not, haven’t been a major contributor to the phenomenon.
His refusal to accept institutional culpability does more to compromise the credibility of the organization in the minds of the general public than any flip-flopping on the tightening bias ever could. Saying the Fed doesn’t have direct responsibility for that issue, but it is important nonetheless, and then segueing into a general statement about the need for greater worker mobility isn’t helpful. And it does nothing to address the skepticism of many regarding who they represent in fact.
The Fed talks a lot these days about “makeup strategies.” It seems like a Freudian choice of words. It is also yet more theory over substance. No one who is not in a classroom wants to hear how they might deal with the inflation they refuse to acknowledge when it starts to get above target. Assuming away the problem to focus on what they want is the stuff economists love to do.
What they should be doing, however, is spending more effort explaining to the people they freely acknowledge don’t trust them that they are capable of pursuing policies that will help everyone make up