Fed head Powell set to give markets a rough ride in 2019

As reported by Reuters, US Federal Reserve chairman Jerome Powell is setting up a rocky road for investors in 2019 as the chairman sets up for an "unscripted approach" in 2019, where Powell will be giving more post-Fed news conferences than any other Fed chair before him as the new Federal Reserve abandons forward guidance.

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Powell took office in February determined to improve the Fed’s communications with Congress and the public. He meets frequently with legislators, and speaks about policy in a style that is less economic textbook and more folksy than past Fed chiefs, who in recent decades have all been economists. That style may have been part of Powell’s appeal to Trump, but it has arguably contributed to market volatility as investors hang on Powell’s every word for clarity on how much further the Fed may raise rates.

Complicating matters further, weaker global growth may threaten what have been powerful gains in the U.S. job market and strong domestic growth.

It is against this background that starting in January Powell will hold a news conference after every Fed meeting to provide more clarity about Fed actions and thinking, as he explained when he announced the change in June. The change will mean that Powell will hold eight news conferences in 2019, up from the current practice of four per year.

But the change also increases the odds of a stray market-rankling remark. It might be a good time to say even more forcefully that the Fed does not have all the answers, said former Fed Vice Chair Alice Rivlin. “That’s always difficult,” Rivlin said, recounting Greenspan’s reaction when she used the word “guess” in a speech. “(He) said, don’t use the word ‘guess’ because it sounds like we don’t know what we’re doing. And I thought well, okay — but we don’t.”

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