The sun rises to the east of the U.S. Federal Reserve building in Washington, D.C. on July 31, 2013. Central bankers are in demand after an awestruck public watched the Fed wield extraordinary power in its fight against the financial crisis.Reuters
James Bullard, the president of the St. Louis Fed, is one of 17 men and women who will gather this week to debate the appropriate policy setting for the Federal Reserve System. He has no vote, however; it's not his turn this year. When the final decision is made, all he can do is watch.
Yet Mr. Bullard stands out because he has embraced what many in his field consider a dark art: talking in public. He spoke publicly at least 22 times last year, according to a study by Macroeconomic Advisers, the second-most among Fed officials and more than the combined 17 public speeches the Bank of Canada's six-member Governing Council produced in 2013.
Central bankers are in demand after an awestruck public watched the Fed wield extraordinary power in its fight against the financial crisis. Still, Mr. Bullard endures brickbats for his loquaciousness. There is an entrenched opinion that central bankers should be seen more often than heard.
When Stephen Poloz took over as Bank of Canada Governor last year, he indicated that he disapproved of the tendency of Fed officials to debate in public. Canada's central bank has grown somewhat quieter under his leadership. Mr. Poloz is scheduled on Tuesday to deliver the 10th speech by a member of the Governing Council this year. That would match Mr. Bullard's singular effort over the same period.
Purists say too much talk by central bankers risks confusion and volatility in financial markets. The Indiana University-trained leader of the St. Louis Fed takes the opposite view. Mr. Bullard believes he has an obligation to engage the public to teach, and to learn. His approach represents a challenge to those policy makers who continue to guard their right to operate in relative obscurity at a time when central banks have moved to the forefront of the public's consciousness.
"Monetary policy isn't formed in a vacuum," Mr. Bullard said in an interview late last month. "You need to pull everybody in and get good understanding of what policy is going to be. This isn't your father's monetary policy because it's about more than just moving interest rates here or there."
The communication strategies of central bankers will come into focus again this week, as Mr. Poloz will attempt in Drummondville, Que., to clarify how the exchange rate factors into his decision making, and the Fed's policy committee gathers for a two-day meeting in Washington.
Mr. Poloz will be under pressure to erase lingering suspicions that he favours a weaker currency. In Washington, there could be meaningful changes in the guidance contained in the Fed's official policy statement to reflect faster-than-expected economic growth. Chair Janet Yellen is scheduled to hold a news conference on Wednesday.
In the days and weeks that follow, the various regional Fed presidents and some of the governors at the Washington-based Federal Reserve Board will hit the speakers circuit and appear sporadically in the financial press.
Fed officials spoke more than 170 times in 2013, according to Macroeconomic Advisers. That's too much, says Stuart Weiner, an economics consultant at the Santa Fe Group who spent almost three decades at the Federal Reserve Bank of Kansas City.
"There is a disconnect at times between influence and accountability," Mr. Weiner said in a telephone interview. Unlike the Fed chair and the other governors at the Reserve Board, the regional Fed presidents aren't appointed by the President and vetted by the Senate. This bothers Mr. Weiner because their competing views "often are disruptive and confusing." Officials who wreak such havoc should be accountable to the public, Mr. Weiner said.
The proliferation of Fed speakers has created a cottage industry of economists, consultants and financial journalists who follow the U.S. central bank's players the way fantasy sports enthusiasts follow box scores. Mr. Bullard is among the most closely scrutinized.
Dallas Fed President Richard Fisher outdid Mr. Bullard by one speech in 2013. But investors and traders tend to pay closer attention to Mr. Bullard; his comments caused the yield on 10-year Treasury debt to move a cumulative 29 basis points; more than any other official, including Mr. Bernanke, according to Macroeconomic Advisers.
"Bullard is considered a president who has traditionally maintained an even bias," said Adrian Miller, head of fixed-income strategy at GMP Securities in New York. "When he begins to lean one way or another, the market notices."
The St. Louis Fed tends to put extra emphasis on inflation. So it was noteworthy when Mr. Bullard backed quantitative easing, the policy of creating money to purchase financial assets. Last year, he dissented at one meeting because he felt his colleagues were too sanguine about the risk of deflation. He reversed his position when the committee changed its language on inflation.
The St. Louis Fed chief's current message is that the economy is stronger than most at the Fed think. In July, Mr. Bullard said the policy committee likely will need to begin raising the benchmark rate by March. Most forecasters were thinking the middle of 2015. Mr. Bullard now appears to be out of step with Ms. Yellen, who favours delaying higher interest rates for as long as possible. There likely will be more grumbling about how the loose-lipped at the Fed are undermining the chair. And Mr. Bullard likely will continue to ignore his detractors.
"Monetary policy has to react to changing developments in the economy," Mr. Bullard said. "The committee doesn't always want to do that. They kind of want to set a plan and stick with and sometimes you have to change them."