Federal Reserve Chair Jerome Powell would like to be clear.
“I know that a number of you will want to talk about the details of our announcement today, and I am happy to do that in a few minutes,” Powell said at the beginning of his press conference that followed the Fed’s latest policy announcement on Wednesday.
“But because monetary policy affects everyone, I want to start with a plain-English summary of how the economy is doing, what my colleagues and I at the Federal Reserve are trying to do, and why.” (Emphasis ours.)
And with the assertion that the Fed and other central banks ought to be using simpler language to describe their policy moves, Powell brings the Fed into a clearly new era.
It’s an era in which the Fed is raising interest rates into an economy that is doing well, but has seen uneven results for many. And an era when the inevitable future recession — which could happen in two years or ten — still feels distant to many who may not remember the central role the Fed plays in managing the economy through these downturns.
“The main takeaway is that the economy is doing very well,” Powell said.
“Most people who want to find jobs are finding them, and unemployment and inflation are low. Interest rates have been low for some years while the economy has been recovering from the financial crisis.
“For the past few years, we have been gradually raising interest rates, and along the way, we have tried to explain the reasoning behind our decisions. In particular, we think that gradually returning interest rates to a more normal level as the economy strengthens is the best way the Fed can help sustain an environment in which American households and businesses can thrive. Today, we have taken another step in that process by raising our target range for the federal funds rate by a quarter of a percentage point.”
And all the way up until that last sentence, people who don’t pay close attention to the economy should be able to clearly understand what Powell is saying — things are good for many people, and the economy is in good shape.
So while the target audience for Powell’s discussion of the economy is not a markets-oriented crowd, his push to make Fed communications less opaque should be welcomed by markets as well as the general public.
After the financial crisis, Fedwatching — the activity of parsing every communication from every Fed official for clues on how monetary policy might change — became a skill unto itself. But that era is over.
And as the Powell era begins to pick up steam, perhaps tracking the Fed will seem less an exercise in fortune-telling and more an exercise in following directions. Clearly.
NOTE: A version of this story was published on June 14.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland