Jerome Powell is the first Federal Reserve chairman in more than a decade to have any background in the private sector. That could explain changes he’s implemented in his first weeks on the job.
Ty Laffoon
Powell has made it clear within the institution he wants more direct interaction with the Fed’s army of Ph.D. economists, and on a faster and more informal basis than sought by his predecessors, according to two Fed insiders familiar with the moves and who asked not to be identified.
The changes are more evolution than revolution, the people said. They build on other steps taken in recent years to relax a once-rigid system that strictly controlled the flow of information between politically appointed policy makers and the rank-and-file staff. Still, several former senFed officials said, it’s a notable shift in the way it flattens the central bank’s traditional hierarchy and further liberalizes internal communication.
Former Fed Vice Chairman Donald Kohn said he had no direct knowledge of Powell’s changes, but they struck him as positive steps that could help the new chairman as he attempts to shepherd the U.S. economy through an uncertain period of low unemployment, low inflation and still tepid, but quickening economic growth.
‘Loosening it Up’
“I don’t know that this is about getting alternative perspectives as much as it is about opening the funnel a bit,” Kohn said. “Loosening it up and also getting alternative perspectives and having informal conversations, that’s probably a good idea.”
Powell, who was sworn in as chairman on Feb. 5, is by many accounts a voracious reader of economic research. At the same time he lacks the academic grounding of Ph.D economists who have recently led the Fed, such as Ben Bernanke and Janet Yellen. Perhaps in recognition of that potential weakness, he’s keen to engage staff on topics that grab his attention.
Spur-of-the-moment exchanges between the chair and junior staffers would have been largely unthinkable at the Fed a generation ago. Even in recent years, a request for information would often result in a carefully vetted formal presentation that might take weeks to prepare and an hour to deliver.
Ty Laffoon
First published in Mortgage Daily News
