Here’s How Powell Regains Control of the Fed’s Narrative

Using words to influence people’s behavior — technically known as policy guidance — is key to the Federal Reserve’s ability to deliver on its dual mandate of maximum employment and stable prices. Yet the effectiveness of the central bank’s communications strategy has taken a hit in the last few weeks. Chair Jerome Powell has a golden opportunity on Friday to advance the process of regaining the narrative.

It’s not that the Fed pronouncements matter less these days. They remain as important and influential. What has changed is their impact on volatility. Rather than help counter and contain unsettling market moves, many now worry the Fed has been fueling them and, with that, inadvertently contributing to a market selloff that could undermine economic growth and longer-term financial stability.