Powell’s pivots leave Wall Street dazed

Bloomberg

Federal Reserve Chairman Jerome Powell, who pledged early in his tenure to speak in “plain English” and improve the central bank’s public communications, is finding it tough to deliver a clear message.
In the latest of several reversals, Powell dismissed the recent deceleration in prices as likely “transitory,” six weeks after he described low inflation as “one of the major challenges of our time’’ risking a Japan-style crisis. The pivot whipsawed financial markets, sen- ding US stocks lower and the dollar higher as traders pared bets that the Fed’s next move would be a rate cut.
The abrupt change in tone highlights the pitfalls of efforts by Powell, 66, to boost transparency. The former private-equity executive doubled the num- ber of annual press conferences this year to eight from the four under predecessors Janet Yellen and Ben Bernanke, who were both economics professors.
Last year, Powell described interest rates as a “long way from neutral’’ and the shrinking of the Fed balance sheet as on “autopilot,’’ two declarations he walked back.
“Certainly relative to Yellen and Bernanke, he tends to give short answers and not a lot of nuance,” said Ethan Harris, co-head of global economics research at Bank of America Corp. in New York. “You are left with half the picture in some cases.’’
Some investors had been expecting Powell might hint at the possibility of an interest-rate cut, a view that was supported by the release of the Federal Open Market Committee’s statement that highligh-ted that inflation and core prices, excluding food and energy, were running below the committee’s 2 percent goal.
Instead, Powell pushed back against questions of what might cause the Fed to lower rates, and repeatedly described the issue as temporary. He cited a Dallas Fed measure that excludes high and low readings and pointed to a few categories including portfolio management and investment advice services, clothing and footwear, and air transportation.