Bernanke and the media — Round One coming up

April 25, 2011

The Federal Reserve needs to burnish its image, but press conferences aren’t entirely a public relations exercise.

For Fed Chairman Ben Bernanke, the emphasis on greater openness predates the financial crisis. After his notoriously cryptic predecessor Alan Greenspan, Bernanke has made the Fed more open and his own statements easier to parse.

Many economists, Bernanke included, believe financial markets function more smoothly when the Fed makes its intentions, and its expected reaction to twists and turns in the economy, crystal clear.

In fact, one of Bernanke’s early transparency initiatives, an explicit target for inflation, was shot down by Democratic Congressman Barney Frank who argued that since the Fed has a dual mandate to keep inflation in check but also promote maximum employment, setting an inflation target would focus too much on one side of that equation.

Nevertheless, Bernanke has slowly made Fed thinking more accessible to the public. Under his direction, the Fed published minutes of policy meetings after three weeks, instead of six.

It has begun to publish its economic forecasts four times a year, instead of two, and extended the length of its outlook to three years from two. It has included a long-range forecast as well — a backdoor way of saying what its preferred level of inflation is (1.6 percent to 2 percent).

Bernanke’s own speeches, testimony, and responses to questions at congressional hearings have been much easier to understand than those of his predecessor, who believed some ambiguity about the Fed’s intentions left it with more policy options.

Still, the crisis underscored a need for the Fed to explain itself directly to the public. Bernanke will hold the first-ever regularly scheduled news conference by a head of the U.S. central bank on Wednesday at 2:15 p.m.

Almost all other major central bank governors hold press conferences connected to monetary policy decisions, and Bernanke has been slowly laying the groundwork for regular sessions with the media.

He has given two interviews to CBS television’s “60 Minutes.” He has spoken twice before the National Press Club and taken questions afterward. He answered questions from college students on the record.

He has ample experience answering confrontational and sometimes hostile questions from lawmakers at hearings over financial bailouts and the financial crisis of 2007-2009.

The news conference will be held at the Fed’s Martin building in a room on the top floor that overlooks the National Mall. It is expected to last about 45 minutes starting with a brief statement by Bernanke.

Photo credit: Reuters/Mike Blake (Bernanke addressing banking convention March 23)

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So when will Ben Bernanke explain what ‘assets’ the Federal Reserve bought when they doubled M0 by creating $1,200,000,000,000 out of nothing?

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