The Message of the June Fed Meeting: There’s a completely new Chairman in Charge

Jerome Powell’s policy decision was in line with his predecessors, nevertheless he made a series of improvements in which give him more flexibility within the years ahead.

The Federal Reserve chairman Jerome Powell in March. On Wednesday, he said he might double the number of Fed news conferences. CreditCarolyn Kaster/Associated Press

Jerome Powell has been chairman of the Federal Reserve for more than four months. nevertheless with his news conference Wednesday he finally took charge.

Mr. Powell signaled no dramatic about-face through the policies pursued under his predecessor; the Fed’s policy committee raised its main target for interest rates, as had been widely expected. By creating subtle improvements in custom, though, he put a completely new imprint on the institution, with potentially big implications for monetary policy along with the economy.

He began his session with the news media with what he called a “plain-English” description of what the Fed had done along with why, a contrast with the practice of his predecessors Janet Yellen along with Ben Bernanke, both Ph.D. economists who prefaced their appearances with long prepared statements loaded with monetary policy jargon.

“The economy can be doing very well,” Mr. Powell said, standing before reporters (Ms. Yellen along with Mr. Bernanke both chose to sit at a desk for their post-meeting news conferences). “Most people who want to find jobs are finding them, along with unemployment along with inflation are low.”

Mr. Powell announced in which he might begin holding a news conference after every Fed policy meeting starting in January; currently such a session can be held after only four of the eight annual meetings.

Although he said This specific was not meant to signal any change within the direction of policy, This specific opens up more flexibility for the Fed as This specific sets interest rate policies. Financial markets currently expect interest rate increases only in meetings having a news conference; at This specific point the Fed will hold the option of creating more than four policy moves a year without unnecessarily surprising markets.

along with the Federal Open Market Committee, which Mr. Powell leads, changed its statement describing its rate increase in a way in which removed a mainstay of its monetary policy of recent years. Dating to the Bernanke era, the Fed has used “forward guidance” to signal the future direction of interest rates.

For example, at the March policy meeting, the committee said in which its interest rate target “can be likely to remain, for some time, below levels in which are likely to prevail within the longer run.”

in which language was excised through the completely new policy statement, which said only in which the “timing along with size” of future rate increases will be determined by many factors.

This specific change reflects a judgment in which the economy can be in much sounder shape than This specific was a few years ago, when its policy rate was stuck near zero along with This specific forward guidance was a tool the Fed used to try to guide interest rates.

Mr. Powell emphasized in which This specific dropping of forward guidance wasn’t a signal of a change within the direction of policy, nevertheless rather a reflection of changing times.

Taken together, Mr. Powell signaled a Fed in which can be broadly confident within the state of the economy, along with happy to say so for the audience far beyond the bond traders who hang on the Fed chairman’s every word.

nevertheless he also sought to change some of the practices of the central bank in ways in which will maintain greater flexibility in 2019 along with beyond. By doubling the number of news conferences along with removing the forward guidance on rates, Mr. Powell will find This specific easier to adjust on the fly, such as by accelerating the pace of rate increases, if the economy evolves differently than he at This specific point forecasts.

A risk with these moves can be in which the Fed — which has carefully maintained its image as a bastion of cautious, apolitical policymaking in Washington — might become too quick to make abrupt improvements, or adopt a tinge of showmanship.

The central bank usually improvements its practices glacially, aiming to be boring along with predictable. The June meeting may have contained no meaningful change within the direction of policy. nevertheless This specific signaled in which Mr. Powell can be putting his stamp on the institution along with can be trying to ensure in which the Fed can be poised to react decisively along with with clear public communication, whatever the economic future may hold.

Neil Irwin can be a senior economics correspondent for The Upshot. He previously wrote for The Washington Post along with can be the author of “The Alchemists: Three Central Bankers along having a World on Fire.” @Neil_Irwin Facebook