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With fate of economy in his hands, Powell plays it low-key

Last Updated Mar 22, 2018 at 6:00 am PDT

In his first news conference as head of the world’s leading central bank, Jerome Powell avoided any professorial lectures.

His replies were briefer than his predecessors’. He said nothing of himself personally. He projected the air of an experienced technocrat, more steeped in finance than the complexities of economic theory.

If anyone was wondering how the new chairman of the Federal Reserve would differ from his two immediate predecessors, Janet Yellen and Ben Bernanke, Wednesday’s exchange with reporters offered some clues. Powell, unlike the longtime scholars Yellen and Bernanke, is not an economist. He hasn’t spent years delving into why economic growth leaves behind some segments of society.

The chairman instead came across as a consensus builder and only one member of a large committee of policymakers. And at times Wednesday, he appeared a bit nervous as he twisted open a water bottle or reached for his reading glasses.

His stated mission, he said, was to convey that Fed officials had made one policy change this week — and nothing more. The officials voted unanimously to raise the federal funds rate — what banks charge to lend to each other — by a modest quarter percentage point to a still-low range of 1.5 per cent to 1.75 per cent.

Yet reporters lobbed questions at Powell about tax cuts, a possible trade war, sluggish wage gains, the 2018 elections and the Fed’s seeming optimism about growth over the next two years without the threat of high inflation.

“We made one decision at this meeting,” Powell said, speaking a month after ascending to the Fed’s top job, chosen by President Donald Trump, after having served nearly six years as a Fed governor.

Unlike Bernanke or Yellen — who had to grapple with the 2008 financial crisis and its aftermath — Powell is presiding over a generally healthy U.S. and global economic picture. Accordingly, he was pressed about what Trump’s policies might mean for the trajectory of the economy and for the Fed.

Powell acknowledged that the president’s policies came up in discussion as Fed officials and the leaders of its regional banks met Tuesday and Wednesday. They had discussed how the tariffs introduced this month by Trump — with additional import taxes to potentially follow — could slow global trade. But the conversation didn’t go further than that risk, Powell said in response to multiple questions.

With the tax cuts in place, Fed officials did estimate that growth would accelerate slightly. The economy would likely expand 2.7 per cent this year, more than the Fed’s prior forecast of 2.5 per cent, according to a survey of projections released after the meeting. The median growth estimate for 2019 was 2.4 per cent, up from 2.1 per cent previously. This acceleration is far more tepid than the 3 per cent growth being predicted by the Trump administration.

But when asked about the Fed’s growth estimates and the tax cuts, Powell downplayed them. And sounding a note of modesty, he observed that the central bank’s estimates came not from him personally but from a 15-person committee with differing opinions.

“The whole thing is very uncertain,” he said of the likely consequences of $1.5 trillion worth of tax cuts over the next decade.

Powell was similarly non-committal about whether the Fed might tolerate inflation running above its annual 2 per cent target level, after having had inflation run below that target for several years.

The Fed wants to take the “middle ground,” Powell said.

The chairman’s inaugural news conference ran roughly 45 minutes, about 15 minutes shorter than Bernanke’s and Yellen’s sessions with reporters typically lasted. But Powell — a long-standing veteran of the investment world — entertained about as many questions as those two Ph.D. economists had yet was visibly hesitant to give answers that might betray his own views about the economy.

Asked whether he might consider holding a news conference after each of the Fed’s policy meetings — rather than after every other meeting — Powell measured his words. He said he hadn’t yet decided. But he added that no one should assume that holding more news conferences would signal that the Fed intends to raise rates more than investors expect.

At one point, Powell forgot momentarily that he had been asked about the possibility of additional televised news conferences.

“Ah, press conferences,” he said. “That is something I’m going to be carefully considering.”