More is Less

Is the Fed’s transparency confusing us?

Yesterday the Federal Reserve concluded its two-day meeting and issued a statement—a long, meandering, abstruse statement. Reading the Fed’s press release has become a thankless chore. Most Fed-watchers just compare the current statement with the one from the prior meeting to look for word-changes that might indicate shades in what the Fed is thinking.

The Fed knows we do this. So they discuss and debate every comma and verb tense. Sometimes committee members even dissent in their policy votes over the wording. As a result, over the years their press release has become both longer and less communicative. Ten years ago, it took less than 150 words to communicate their message. Now the Fed’s statement has grown to an 800-word consensus-driven monstrosity, filled with pabulum and bureaucratese. It’s like the old saw about a camel being a horse designed by a committee.

Fed-watchers now just jump to the supplement—the dot-plots and other materials that communicate their projections. The Chair’s press conference afterwards can also be helpful, but the Q&A takes a long time to sit through.

It would be great if the Fed kept their graphs but went back to the pre-Financial Crisis 150-word directive that stated their perspective clearly and concisely. Fewer words, more meaning.

Douglas R. Tengdin, CFA

Chief Investment Officer

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