Powell’s Comments Unleash Unsettling Volatility
The reaction by stocks and bonds to his remarks is more than just noise. Undue tumult increases the risk of economic and market accidents.
Not just making noise.
Photographer: Al Drago/Bloomberg
It really shouldn’t be this way, and it doesn’t need to be. Yet once again remarks by Federal Reserve Chair Jerome Powell fueled considerable volatility in markets that could risk both economic well-being and financial stability. It’s a phenomenon that not only highlights repeated policy slippages but also the lack of important structural and strategic underpinnings at the Fed.
Several times in the last few years, comments at the press conference that traditionally follows the conclusion of the two-day FOMC meetings have caused significantly more volatility than the prior publication of the central bank’s policy decision and Powell’s written remarks. On Tuesday, the initial market volatility caused by the release of Powell’s opening statement before the beginning of his semiannual congressional testimony was significantly amplified by his subsequent answers to senators’ questions.