Yesterday concluded the two day meeting of the Federal Reserve's Open Market Committee. This Committee is the one that put in place the Fed's on-going monetary policy.
And as is traditional, the Fed Chairman, Jerome Powell concluded the meeting with a statement and a question and answer period. I supposed this is designed to let us feel that we have some insight into the current thinking of our central bank. The reality, of course, is quite different. The inner workings of the Federal Reserve are among the most secretive on earth. So we are left to sort through this statement of the Chairman, followed in a month or so with the minutes of the meeting just completed.
It is an arcane process, but one which most of the financial world seems to have grown accustom to .
In looking at the Chairman's Statement from yesterday, you can see the hands of a master. Written by someone who is well acquainted with the form and structure of a legal brief. One which says more by omission than actual straight talk.
After all, Jerome Powell's academic training is in the law. And as an attorney, he came late to this financial world. Unlike the convoluted deailed language of an Alan Greenspan, for instance. Who often wore down issues with the simple verbosity, Powell looks to emphasize the positive, while covering himself from any future criticism.
Let's take a look at his statement:
After opening with the usual recollection of the Fed's twin mandate of stable prices and full employment, Powell goes on to say: (And I quote):
Today, the Federal Open Market Committee kept interest rates near zero and maintained our asset purchases. These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete.
By any standard a brilliant piece of camouflage.
Powell will go on to say that the current economic recovery is the best we've seen in “decades.” How household spending is up, the housing sector is strong, as is business investment. In short we are continuing to bounce back from last year's depressed levels.
Overall a positive, up-beat assessment of the current economy.
Now let's go back an review again that important second paragraph.
In it Powell will let you know why we're experiencing this recovery.
The reason for the recovery is because the Federal Reserve is continuing (quote) to deliver powerful support to the economy.
Specifically the Fed is providing zero interest rates, combined with an incredible $120 Billion dollars in asst purchases, primarily US Treasuries and Agencies.
In a less than subtle manner, Powell has just let us know that without our Friends at the Fed, we'd all be toast.
Quite a statement, and I'm sure a very accurate portrayal of the overall thinking at the US Central Bank.
And Finally Powell points out that this all is back by the Fed's own Balance Sheet. An interesting note of bravado.
So in just two short sentences, the Chairman of the Federal Reserve, has assumed the mantel of director and savior of the economy.
Heavy is the Head the Wears the Crown...