Will the Federal Reserve's "Plain Language Era" come to an end? Powell's final appearance on Wednesday

None

Source: Jin10 Data

Powell is likely to hold his last formal press conference as Federal Reserve Chair on Wednesday (early Thursday Beijing time)—this may mark the end of his period of regularly engaging with journalists as the top official of the Fed.

Investors and economic observers are closely watching such press conferences. Supporters of regular appearances by Fed Chairpersons believe that this allows the central bank to shape narratives around its interest rate decisions and helps markets digest Fed policies. However, some critics, including Kevin Warsh, a Trump-nominated candidate to succeed as Fed Chair, believe Fed officials communicate excessively.

Warsh is very likely to be confirmed before the Fed’s next policy meeting in mid-June, and he has hinted that he might completely stop holding regular press conferences.

Julia Coronado, President of MacroPolicy Perspectives and a former senior Fed official, said this is precisely why Powell’s Wednesday appearance is “so significant.”

She added, “I expect Powell to defend, directly or indirectly, the value of transparency, of facing the public and journalists, and of self-explanation.”

A Regular Press Conference for Over a Decade

Fed officials meet every six weeks (eight times a year) to set interest rate policies. Former Fed Chair Ben Bernanke first began holding press conferences after some meetings in 2011, initially four times a year.

Bernanke stated at the time, “In the past, the mystery surrounding the central bank’s operations was about not letting anyone know what you’re doing.”

In 2019—less than a year after taking office—Powell started holding press conferences after each meeting. When announcing this move, Powell said he wanted to “summarize economic conditions in plain language” because monetary policy affects everyone. He stated:

“We believe that if we explain as clearly as possible what actions we might take and why, the overall outcome could be better. To do this, we try to communicate our expectations about how the economy will evolve and how our policy stance might change.”

Over time, Powell has become more cautious when answering journalists’ questions.

Vincent Reinhardt, Chief Economist at Mellon Investment Company, said in an email:

“The attention gained from impromptu answers exceeded his expectations or hopes. Over time, he became more focused on his prepared remarks. His edges were smoothed, conflicts reduced, and the amount of information decreased.”

By 2024, Harvard economist Greg Mankiw said Powell’s cautious attitude on the podium has made press conferences a waste of time.

Mankiw wrote on his blog, “When the Fed Chair answers questions from reporters, it seems like he’s using as many words as possible to convey as little information as possible.” He also added, “From the Fed’s perspective, an ideal press conference would have no news, mainly repetitions and clichés.”

“Having a press conference means there’s some important news to release”

During his testimony to the Senate Banking Committee last week, Warsh hinted he might adopt Mankiw’s suggestion.

When asked by Ruben Gallego, a Democratic senator from Arizona, whether he would insist on holding eight press conferences, Warsh said:

“When you hold a press conference, there has to be some important news to announce.”

The Fed began moving toward transparency after shocking markets with a large rate hike in early 1994, which led to the bankruptcy of Orange County, California, later that year—the largest municipal bankruptcy in U.S. history at the time.

Coronado pointed out, “Such volatility is of no value to the economy.” The Fed believes that “clearly explaining what you’re doing and why” is a better approach.

Some experts think that despite Warsh’s criticism of the Q&A sessions, he might find it hard to resist shaping public perception of the Fed under his leadership. Deutsche Bank’s Chief U.S. Economist Matt Luzzetti said he doubts Warsh will end the practice of holding press conferences after every meeting.

Luzzetti stated in a client report:

“Press conferences provide him with a powerful and frequent platform to immediately imprint his personal mark on Fed messaging after each policy decision and to shape the narrative. Giving up this stage would be a missed opportunity.”

At this week’s meeting, the Fed is almost certain not to adjust interest rates. With the ongoing conflict with Iran, economic outlook remains highly uncertain, and with inflation currently surging, the expected rate cuts later this year seem more distant.

Journalists are likely to ask Powell whether he will remain on the Fed Board after his term as Chair ends on May 15.

U.S. Attorney Jeanine Pirro announced last Friday that she would end her criminal investigation into Powell. Ian Katz, Managing Director at Capital Alpha, said it’s still unclear whether this statement will influence Powell’s decision to stay on as a Fed Board member.

Powell can continue serving as a Board member until his term ends in January 2028.