Fed's grades slip in Wall Street's latest report card
Send a link to a friend
[December 01, 2018]
By Ann Saphir
SAN FRANCISCO (Reuters) - Wall Street last
month gave the Federal Reserve its worst grade since Jerome Powell took
the helm of the U.S. central bank earlier this year, docking points for
a communications misstep early in October that sent U.S. stocks
tumbling.
The report card is included in the New York Fed's survey of primary
dealers that each quarter elicits an assessment of the Fed's
communication with markets and the public over the prior six to eight
weeks, using a scale of zero, for "ineffective," to five, for
"effective."
The Fed received an average score of 3.57 in the latest survey,
conducted October 25 to 29 and released on Friday. That's down from 3.87
in mid-July, the last time the Fed was graded on its communication
prowess. The first grade of Powell's tenure, in April, was 3.82.
![](http://archives.lincolndailynews.com/2018/Dec/01/images/ads/current/castlemanor_sda_FINANCIAL_2017.png)
The downgrade is at least partly attributable to Powell's remark on Oct.
3 that interest rates were probably a "long way" from neutral, which
seemed to contradict his comment a couple of months earlier rejecting a
too-rigid reliance on the neutral rate to shape policy because it could
lead to costly mistakes. Stocks plummeted in response.
"Several dealers noted that recent communication from Fed officials has
been clear. However, several dealers noted that they perceived recent
communication regarding the neutral policy rate and its role in
informing monetary policy as being unclear or at times inconsistent with
prior Fed communication," the survey said in the comments section.
[to top of second column] |
![](../images/120118pics/busine53.jpg)
The seal for the Board of Governors of the Federal Reserve System is
displayed in Washington, U.S., June 14, 2017. REUTERS/Joshua
Roberts/File Photo
![](http://archives.lincolndailynews.com/2018/Dec/01/images/ads/current/atlantabank_lda_CHRISTMAS_2016.png)
Also that month, President Donald Trump called the Fed "crazy."
This month, Powell and other Fed policymakers have tried to dispel any
perception of hawkishness. Markets have rallied this week after Powell signaled
he'd be open to taking a go-slow approach on rate hikes.
Still, the Fed under Powell is so far scoring higher than it did when Powell's
predecessor Janet Yellen was in charge.
In October 2015, when the Yellen Fed was navigating the difficult transition
from years of super-low interest rates to a cycle of rate hikes, she got the
worst grade of her tenure -- an average 2.27 out of 5.
Will Powell be able to earn enough extra credit with Wall Street to boost his
grade?
Stay tuned until February, the next time the report will be released.
(Reporting by Ann Saphir; Editing by Sonya Hepinstall)
[© 2018 Thomson Reuters. All rights
reserved.] Copyright 2018 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
![](http://archives.lincolndailynews.com/2016/Aug/26/images/ads/current/ldn_business_directory_small2_2016.png) |