Here’s What the Federal Reserve Should Do
The central bank would be smart to acknowledge a weakening economy and the continuing risk of bank tremors, and it would benefit from a shift in its approach to rates.
A few suggestions for Chair Jerome Powell.
Photographer: Samuel Corum/Bloomberg
With a 25-basis-point interest-rate increase being so widely anticipated, the focus on today’s Federal Reserve policy meeting will be less on what the world’s most powerful central bank does and more on what it says in its statement and, especially, on what Chair Jerome Powell says during his press conference. This is of particular relevance for policymakers’ assessment of the economic outlook, the implications of the continuing banking tremors and the path for rates.
With this Fed in particular, it has proved challenging to predict the content and consistency of its communication, especially at the conclusion of Federal Open Market Committee policy meetings. Indeed, a recent study by the Center for Economic and Policy Research found that not only has “market volatility [been] three times higher during press conferences held by current Chair Jerome Powell than those held by his predecessors” but “they tend to reverse the market’s initial reactions to the Committee statements.”