Powell widens Fed charm offensive as Trump attacks mount

Communication will be ramped up in an effort to build public trust

Jerome Powell is ramping up Federal Reserve communication to build public trust and help insulate it from political attack.

In recent weeks, the Fed has announced a series of initiatives, including a monetarypolicy review road show, a semi-annual assessment of financial stability, and its inaugural Supervision and Regulation Report. These follow Powell’s early promise of “plain-English’’ explanations and a doubling of his press conferences starting next year.

Those initiatives, from the Fed’s first chair from private equity, are aimed at broadening public support at a time when the central bank is raising borrowing costs for consumers and businesses. Powell’s mission has taken on greater urgency given U.S. President Donald Trump’s attacks and the residual suspicion in Congress about Fed power.

The strategy marks a break from the Fed’s typically stoic posture when under assault from the outside, effectively going on the offence to preserve its independence rather than assume a defensive crouch. If successful, the steps could also build confidence before the next recession, when the Fed may again need to use controversial emergency policies such as bond buying that infuriated some U.S. lawmakers.

“I see in the Powell Fed people who are trying to take on board greater participation from the country,’’ said Peter ContiBrown, a Fed historian at Uni- versity of Pennsylvania’s Wharton School. “The entire idea is that the Fed must have legitimacy and accountability to be effective.’’

That’s the long game for Powell. His background as a former Wall Street banker make greater communication a more instinctive response than previous Fed chairs, though Ben Bernanke and Janet Yellen had already moved a long way from the opacity of Alan Greenspan’s era.

Confronted with the populism that Trump is channelling, Powell’s predecessors say the institution needs to be defended. “It is not a desirable thing for a president to comment so explicitly on Fed policy,” Yellen said in October. In a newly published book, former Fed chair Paul Volcker called the institu- tion a “precious asset” that “does need to be shielded from partisan politics.”

In the short term, this approach faces some serious challenges. Powell will next month begin holding a press conference after every meeting of the Federal Open Market Committee, addressing the public roughly every six weeks compared with once a quarter.

At the same time, officials will continue publishing quarterly forecasts. How all these parts map together, and whether more public comment from Powell creates greater clarity, is a risk.

There’s plenty of scope for confusion. Investors have dialed back expectations for policy tightening next year to less than one quarter percentagepoint move. That compares with Fed forecasts in September that showed three 2019 hikes, though these will updated at the FOMC meeting next week and could dip closer to market expectations.

“Data dependence, by design, is going to produce volatility in rate markets,’’ said Ed Al-Hussainy, senior global rates analyst at Columbia Threadneedle Investments. “At some point, that volatility has the potential to become disruptive.’’

More volatility adds to the cost of borrowing as lenders demand higher returns for interest-rate risk.

Speaking more frequently may help Powell keep market expectations closer in line with Fed thinking; markets could also seize on phrasing by Powell and interpret it in ways he didn’t intend.