Will the Federal Reserve's "Plain Language Era" come to an end? Powell's final appearance on Wednesday

Powell is likely to hold his final formal press conference as Federal Reserve Chair on Wednesday (early Thursday Beijing time)—this may mark the end of his period of regularly answering questions from reporters as the top official of the Federal Reserve.

Investors and economic observers closely watch such press conferences. Supporters of regular appearances by the Fed Chair believe this allows the central bank to shape narratives around its interest rate decisions and helps markets digest Fed policies. However, some critics, including Kevin Warsh, a Fed nominee to succeed Trump’s pick for Fed Chair, argue that Fed officials communicate excessively.

Warsh is likely to be confirmed before the Fed’s next policy meeting in mid-June, and he has hinted that he might completely stop holding regular press conferences.

Julia Coronado, President of MacroPolicy Perspectives and a former senior Fed official, said this is precisely why Powell’s Wednesday appearance is “so significant” as his last on the podium.

She added, “I expect Powell to defend, directly or indirectly, the value of transparency, of engaging with the public and reporters, and of self-explanation.”

A tradition of over a decade of regular press conferences

Fed officials hold meetings every six weeks (eight times a year) to set interest rate policy. Former Fed Chair Ben Bernanke first began holding press conferences after some meetings in 2011, initially four times a year.

Bernanke said at the time, “In the past, the mystery surrounding the central bank’s operations was about not letting anyone know what you’re doing.”

In 2019—less than a year into his term—Powell started holding press conferences after each meeting. When announcing this move, Powell said he wanted to “summarize economic conditions in plain language,” because monetary policy affects everyone. He stated:

“We believe that if we explain as clearly as possible what actions we might take and why, the overall outcome could be better. To do this, we try to communicate our expectations about how the economy will evolve and how our policy stance might change.”

Over time, Powell has become more cautious when answering reporters’ questions.

Vincent Reinhardt, Chief Economist at Mellon Investment Corporation, said in an email:

“The attention gained from impromptu answers exceeds his expectations or hopes. Over time, he has become more focused on his prepared remarks. The edges have been smoothed, reducing points of conflict and also reducing the amount of information.”

By 2024, Harvard economist Greg Mankiw said Powell’s cautious attitude on the podium has made press conferences a waste of time.

Mankiw wrote on his blog, “When the Fed Chair answers questions from reporters, he seems to be using as many words as possible to convey as little information as possible.” He also added, “From the Fed’s perspective, an ideal press conference would have no news, mainly repetitions and clichés.”

“There’s got to be some important news to announce at a press conference”

When testifying before the Senate Banking Committee last week, Warsh hinted he might adopt Mankiw’s suggestion.

When asked by Ruben Gallego, a Democratic senator from Arizona, whether he would insist on holding eight press conferences, Warsh said:

“When you hold a press conference, there’s got to be some important news to release.”

The Fed’s move toward transparency began after a major rate hike in early 1994 shocked markets and led to the bankruptcy of Orange County, California, later that year—the largest municipal bankruptcy in U.S. history at the time.

Coronado pointed out, “Such volatility is of no value to the economy.” The Fed believes that “clearly explaining what you’re doing and why is a better approach.”

Some experts think that despite Warsh’s criticism of the Q&A sessions, he may find it hard to resist shaping public perception of the Fed under his leadership. Deutsche Bank’s Chief U.S. Economist, Matt Luzzetti, said he doubts Warsh would end the practice of holding press conferences after every meeting.

Luzzetti stated in a client report:

“Press conferences provide him with a powerful and frequent platform to immediately imprint his personal mark on Fed messaging after each policy decision and shape the narrative. Giving up this stage would be a missed opportunity.”

At this week’s meeting, the Fed is almost certain not to change interest rates. With the ongoing conflict with Iran, economic outlook remains highly uncertain, and with inflation currently surging, the expected rate cuts later this year seem more distant.

Reporters are likely to ask Powell whether he will remain on the Fed Board after his term as Chair ends on May 15.

U.S. Attorney Jeanine Pirro announced last Friday that she would end her criminal investigation into Powell. Ian Katz, Managing Director of Capital Alpha, said it’s unclear whether this statement will influence Powell’s decision to stay on as a Fed Board member.

Powell can continue serving as a director until his term ends in January 2028.