Fed officials need to stop speaking out of turn
The Federal Reserve is among the world’s most powerful institutions. When its policymakers speak, they have immense potential to move markets, particularly at a time when the central bank’s pitched battle against inflation is arguably the most important story in global economics. It should be obvious, then, that Fed officials need to carefully weigh when and where they speak, and to err on the side of discretion.
Apparently it’s not obvious enough.
Last week, James Bullard, president of the Federal Reserve Bank of St. Louis and a voting member of the policymaking Federal Open Market Committee, gave a speech on the sidelines of annual meetings held by the International Monetary Fund and the World Bank. It was no public address. Mr. Bullard spoke at a private event that Citigroup Inc. — a bank overseen by the Fed — had arranged for a select group of clients, with no media invited. His comments reportedly touched on monetary policy and financial stability, topics that could hardly be of greater importance at a volatile time in global markets.
The St. Louis Fed pointed out that Mr. Bullard had received no compensation, made similar remarks publicly before and afterward, and participated in the event in the past. Yet none of these excuses mitigates the fundamental transgression: The exclusive time with Mr. Bullard clearly had value to those present and to Citigroup, meaning he effectively allowed his public position to be used for private gain. The suggestion that he has done this before — that such events are routine — makes the optics even worse.
How should the Fed respond?
A similar incident last year should be instructive. When it emerged that certain Fed officials had made securities trades in 2020, at a time when the central bank was undertaking emergency interventions that affected the value of those securities, the Fed faced a dilemma. As with Mr. Bullard, the officials’ actions might not have violated the letter of relevant codes of conduct. But they were plainly inappropriate — so the Fed reviewed and rewrote the rules.
The Bullard incident merits the same response. Fed officials should be allowed to hold private meetings with the aim of gleaning information about what’s happening in markets and the economy. They shouldn’t be permitted to share their views on monetary policy in a closed forum, let alone one arranged by a for-profit enterprise the Fed itself is supposed to be regulating. The rules should change — and the Fed should ensure that no policymaker is giving away what rightly belongs to the public.