[Ed. – Q & A]
At the Federal Open Market Committee (FOMC) press conference on Wednesday, Federal Reserve chairman Jay Powell painted a dire portrait of the U.S. economy. Despite positive news, such as the better-than-expected May jobs report, Powell suggested that collapsing GDP and sky-high unemployment would persist for the foreseeable future. Equity markets promptly saw their biggest one-day decline since the start of the coronavirus pandemic.
Ironically, Powell went to great lengths during the press conference to stress that the Fed wasn’t inflating asset prices, as an increasing number of financial commentators and investors have claimed. While there’s no evidence that the presser catalyzed the sell-off (Powell said he’s “not even thinking about raising rates”), Powell’s wide-ranging statements throughout the coronavirus pandemic underscore the outsize role of communications in monetary policy.