Federal Reserve Officials Talk Too Much
Excessive communication by the central bank can aggravate the risk of both market and economic accidents.
Fed Chair Jerome Powell during a news conference after the Federal Open Market Committee meeting in November.
Photographer: Kevin Dietsch/Getty Images North AmericaThere was a time, not so long ago, when the Federal Reserve said very little about its policies; its leaders did their utmost to obfuscate rather than clarify. Those days are long gone. Today, we are flooded with “Fedspeak.” Last week alone, 11 top Fed officials made 20 speeches. No wonder there is mounting concern about the risk over-communication poses to the well-functioning of financial markets, the efficient allocation of resources in the economy, and the stability of the global system.
Appearing before a Congressional committee back in 1987, then-Chair Alan Greenspan famously said, “If I seem unduly clear to you, you must have misunderstood what I said.” I detailed in my 2016 book on central banks, The Only Game in Town, that this was part of what Greenspan called a “language of purposeful obfuscation.” It was regarded, to quote the economist Alan Blinder, as a “turgid dialect of English” that used “numerous and complicated words to convey little if any meaning.”