Powell will hold his last press conference as Federal Reserve Chair on Wednesday local time. An era of more than a decade of 'plain language communication' by central banks may also come to an end, as his successor, Warsh, has openly questioned: 'There are too many press conferences; they should only be held when there is significant news.'
Powell is likely to hold what may be his final official press conference as Federal Reserve Chair on Wednesday local time (early Thursday morning Beijing time) — potentially marking the end of his tenure of regular Q&A sessions with reporters as the Fed's top official.
Investors and economic observers closely follow such press conferences. Proponents of the Fed Chair's regular media appearances argue that it allows the central bank to shape narratives around its interest rate decisions and helps markets digest the Fed’s policies. However, some critics, including Kevin Warsh, Trump's nominee to succeed Powell, believe that Fed officials communicate excessively.
Warsh, who is likely to be confirmed before the Fed’s next policy meeting in mid-June, has hinted that he might stop holding regular press conferences altogether.
Julia Coronado, President of MacroPolicy Perspectives and a former senior Fed official, stated that this is precisely why Powell’s potential final appearance at the podium on Wednesday is 'so significant.'
She added, “I expect Powell to defend, either directly or indirectly, the value of transparency, engaging with the public and journalists, and providing explanations for the Fed’s actions.”
More than a decade of regular press conferences
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 select meetings in 2011, initially conducting them four times a year.
Bernanke stated at the time, “In the past, the mystique of central banking was all about not letting anyone know what you were doing.”
Powell began holding press conferences after every meeting in 2019, less than a year into his term. When announcing this change, Powell said he wanted to “summarize the economic situation 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 will likely be better. To that end, we try to communicate our expectations for how the economy might evolve and how our policy stance might change.”
Over time, Powell has become more cautious in responding to reporters' questions.
Vincent Reinhardt, chief economist at BNY Mellon Investment Management, stated in an email:
"The attention his off-the-cuff responses received exceeded his expectations or desires. Over time, he has adhered more closely to his prepared materials. The edges have been smoothed out, reducing points of conflict as well as the amount of information conveyed."
By 2024, Greg Mankiw, a professor of economics at Harvard University, stated that Powell’s cautiousness at the podium had turned press conferences into a waste of time.
Mankiw wrote on his blog: "When the Fed chair answers reporters' questions, he seems to be conveying as little information as possible using as many words as possible." He added: "From the Fed's perspective, the ideal press conference should contain no news, just repetition and platitudes."
"If you are holding a press conference, there should be some important news to announce."
During last week’s testimony before the Senate Banking Committee, Warsh hinted that he might adopt Mankiw’s suggestion.
When Democratic Senator Ruben Gallego of Arizona asked whether he would continue to hold eight press conferences, Warsh responded:
"When you hold a press conference, there should be some important news to announce."
The Federal Reserve began moving toward greater transparency after shocking markets with a sharp interest rate hike in early 1994, which contributed 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 Federal Reserve believes that 'clearly explaining what you are doing and why you are doing it' is a better option.
Some experts believe that although Warsh criticized the Q&A session, he may find it difficult to resist the opportunity to shape public perception of the Federal Reserve under his leadership. Matt Luzzetti, Chief U.S. Economist at Deutsche Bank, expressed doubts that Warsh would end the arrangement of holding press conferences after every meeting.
Luzzetti stated in a report to clients:
The press conference provides him with a powerful and frequent platform to immediately imprint his personal mark on the Federal Reserve's messaging following each policy decision and shape the narrative. Abandoning this stage would be a missed opportunity.
At this week’s meeting, the Federal Reserve will almost certainly make no adjustments to interest rates. With the ongoing conflict with Iran, the economic outlook remains highly uncertain, and as inflation surges currently, the anticipated interest rate cuts later this year seem even more distant.
Reporters are likely to press Powell on whether he will remain on the Federal Reserve Board after his term as Chairman ends on May 15.
U.S. Attorney Jeanine Pirro announced last Friday that she would conclude the criminal investigation into Powell. Ian Katz, Managing Director at Capital Alpha, stated that it remains unclear whether this announcement will influence Powell’s decision to remain on the Federal Reserve Board.
Powell can continue to serve as a board member until his term expires in January 2028.
Editor/KOKO