Federal Reserve Signals: Powell Emphasizes Current Rate Decision

(Bloomberg View) -- Jerome Powell's message might have been: Don't overthink it.

The new Federal Reserve chairman tried a couple of times this week to steer questioners away from obsessing about forecasts and projections. Of the panoply of information the central bank released, Powell wanted the focus on one thing: the quarter-point increase in the benchmark interest rate.

That higher borrowing costs were at risk of being overlooked says something. Hello, people! We just did something here that would in the not-so-distant past have been a stop-the-presses moment! Powell's emphasis is understandable.

It's also a significant departure. Since the financial crisis, the Fed has made it an article of faith that more information on its thinking and the outlook of policymakers is a very desirable thing. Powell's two immediate predecessors, Ben Bernanke and Janet Yellen, took great pains to convey that the projected path of interest rates mattered at least as much as any one step.

The signaling power of Powell's first press conference after presiding over his first meeting of the Federal Open Market Committee was always going to be a big deal. What he said, and didn't, was scrutinized carefully. Quizzed at his press conference on why the Fed's median growth forecast didn't approach 3 percent, given the huge tax cuts, Powell deflected, saying the committee "made, really, one decision at this meeting. And that was to raise the federal funds rate by 25 basis points."

Policy makers, he added, don't vote on forecasts. The median reflects a range of diverse views around the table. Fair enough. In response to a later question about what it would take to project four rate increases this year, rather than three, he returned to his earlier point: "I would go back to the thought that, you know we made one decision at this meeting, and that decision was to raise the federal funds rate by 25 basis points." On this second occasion, Powell was almost dismissive of the path. They "are really just individual projections that are submitted and then compiled." The numbers go up, they go down. He might have added: And life goes on.

Perhaps the chairman is right. The "dot plots" and forecasts have always been, at best, estimates of a group of people from across the country. But it's also true that they have taken on an almost sacramental quality.

Powell's concern about some Fed communication goes back a few years. My Bloomberg News colleague Rich Miller recounted in November that Powell, as a Fed governor, acknowledged "shortcomings" in the dots. Especially because they are anonymous, it can be tough to figure out where the committee is going.

It's been widely speculated the Fed may begin to hold eight press conferences a year -- one after each FOMC rate decision -- rather than the current four. Powell showed some sympathy for that. He might find it more useful than those pesky dots.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Daniel Moss writes and edits articles on economics for Bloomberg View. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.

To contact the author of this story: Daniel Moss at dmoss@bloomberg.net.

To contact the editor responsible for this story: Philip Gray at philipgray@bloomberg.net.

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