• Jerome Powell, the chairman of the Federal Reserve, spoke last week after the Fed’s monthly meeting, conveying the message that the fight against inflation was not yet won and that the Fed anticipated continuing to raise interest rates over the next few months.
• Investors ignored Powell’s message and leaped to the conclusion that the Fed was no longer as hawkish as it had been, sending stocks soaring.
• When Powell spoke yesterday at the Economic Club in Washington, D.C., he wanted to make sure that no one missed the point and reiterated that the process of getting inflation down would be “bumpy” and was likely to take “quite a bit of time”.
• Until 1994, the Fed didn’t even announce at its monthly meeting whether it had raised or lowered interest rates.
• Alan Greenspan, Ben Bernanke, Janet Yellen, and Jerome Powell have all been open about their thinking and have moved steadily toward more transparency and public communication about their policies.
• The job of central bankers has changed and they now have to be good at communicating without any real rule book.
• Powell did a fine job of explaining that the Fed was sticking with its target of 2 percent inflation, and that, as a result, it planned to keep hiking interest rates.
• However, the market rallied strongly, and by day’s end it was up by more than a percentage point.
Published February 8, 2023
Visit The Atlantic to read James Surowiecki’s original post Don’t Read His Lips
