Powell will hold his last news conference as chairman of the Federal Reserve on Wednesday local time. The era of "plain language communication" by central banks, which has lasted for more than a decade, may also come to an end. This is due to the fact that his successor, Warsh, has publicly questioned: there are too many news conferences, "they should only be held when there are important announcements."

Source: Jin Ten Data

Powell may hold his last formal news conference as chairman of the Federal Reserve on Wednesday local time (early Thursday morning Beijing time)—this may mark the end of his time as the top official at the Federal Reserve who regularly engages in Q&A sessions with reporters.

Investors and economic observers closely monitor such news conferences. Supporters of the Federal Reserve chairman's regular media appearances believe this enables the central bank to shape the narrative around its interest rate decisions and helps the market digest the Fed's policies. However, some critics, including Kevin Warsh (the Federal Reserve chairman nominee by Trump), believe that Federal Reserve officials communicate too much.

Warsh is likely to be confirmed before the Federal Reserve's next policy meeting in mid-June, and he has hinted that he may completely stop holding regular news conferences.

Julia Coronado, president of MacroPolicy Perspectives and a former senior Fed official, stated that this is precisely why Powell's last time at the podium on Wednesday is "so significant."

She added, "I expect Powell will defend the value of transparency and public-facing interaction with journalists, either directly or indirectly."

Regular news conferences for over a decade

Federal Reserve officials convene every six weeks (that is, eight times a year) to set interest rate policy. Former Federal Reserve Chairman Ben Bernanke first began holding news conferences after some meetings in 2011, occurring four times a year at that time.

Bernanke stated at the time, "In the past, the mystique of the central bank's operations was to keep people from knowing what you were doing."

Powell began holding a news conference after each meeting in 2019, less than a year into his tenure. When announcing this initiative, Powell said he wanted to "summarize economic conditions in plain language" because monetary policy affects everyone. He said:

“We believe that if we clearly explain the actions we might take and the reasons behind them, the overall outcome is likely to be better. To this end, we try to convey our expectations about how the economy will evolve and how our policy stance may change.”

Over time, Powell has become more cautious in responding to reporters' questions.

Vincent Reinhardt, chief economist at the New York Mellon Investment Corporation, stated in an email:

"His improvised responses garnered more attention than he anticipated or expected. Over time, he has become more focused on his briefing materials. His sharp edges have been smoothed out, reducing points of contention while also diminishing the information content."

By 2024, Harvard University economics professor Greg Mankiw stated that Powell's cautious demeanor at the podium has rendered the news conferences a waste of time.

Mankiw wrote on his blog, "When the Federal Reserve chairman answers reporters' questions, he seems to convey as little information as possible with as many words as possible." He also added, "From the Fed's perspective, an ideal news conference should contain no news, primarily repeating and rehashing."

"There has to be some important news to announce during a news conference."

Last week, while testifying before the Senate Banking Committee, Warsh suggested that he might adopt Mankiw's advice.

When Democratic Senator Ruben Gallego from Arizona asked him whether he would continue to hold eight news conferences, Warsh replied:

"When you hold a news conference, there has to be some important news to announce."

The Federal Reserve began moving towards transparency after it surprised the market with a significant interest rate hike in early 1994, which led to the bankruptcy of Orange County, California, later that year. That was the largest municipal bankruptcy in US history at the time.

Coronado noted, "This kind of volatility adds no value to the economy." The Fed believes that "clearly stating what you are doing and why you are doing it" is a better approach.

Some experts believe that despite Warsh's criticism of the Q&A sessions, he may find it difficult to resist the opportunity to shape public perception of the Federal Reserve under his leadership. Matt Luzzetti, chief US economist at Deutsche Bank, expressed doubt that Warsh would end the pattern of holding a news conference after each meeting.

Luzzetti stated in a report to clients:

"News conferences provide him with a powerful and frequent platform to immediately imprint his personal stamp on the Fed's messaging after each policy decision and shape the narrative. Abandoning this stage would be a missed opportunity."

This week, the Federal Reserve is almost certain not to make any adjustments to interest rates. With the ongoing war with Iran, the economic outlook remains very uncertain, and the anticipated rate cuts later this year seem further away as inflation currently surges.

Reporters will likely press Powell on whether he will continue to serve on the Board of Governors after his term ends on May 15.

US attorney Jeanine Pirro announced last Friday that she would end her criminal investigation into Powell. Ian Katz, managing director at Capital Alpha, stated that it remains unclear whether this statement will affect Powell's decision to remain on the Fed Board.

Powell can continue to serve as a governor until his term ends in January 2028.