It’s Fed Day. We will be focusing on the FOMC’s words at 2:15 this afternoon.
Let’s flash back to last Fed day.
When we write, we know what we mean to say. And when we read what we’ve written, we’re sure we’ve said it. What we sometimes fail to realize is how readers may interpret our words in ways other than we intended.
Misunderstandings are easy to clear up on the fly in the back and forth of face-to-face collegial conversations. But they can linger when a text is the only face of our ideas.
As a result of a chance encounter (in New York on Monday), I have discovered that I need to clarify a point, and my intent, in a commentary I wrote back in September. Though I knew what I wanted to say, I found on Monday that my language left far too much room for misinterpretation. Today I want to clear the air. Setting things right is very important to me.
In advance of the September 2014 FOMC meeting, the market responded with a flurry of activity to a blog and webcast by Jon Hilsenrath of the Wall Street Journal, in which Jon opined about what the Fed might do. One prominent newsletter writer, who subsequently retracted his commentary, characterized Jon Hilsenrath as a “Delphic Oracle.” We were disturbed by the newsletter writer’s suggestion that Jon had some sort of inside knowledge or special status, since that might amount to an allegation that a member of the Fed was violating FOMC rules and leaking information to a chosen journalist.
Our commentary protesting the characterization can be found here. Our dealings with the Fed and central bankers around the world over many years suggest that such a breach would be very much out of character for any member of the FOMC. We have always found members of the Fed to be scrupulously conscientious about the law and FOMC rules.
We objected not to Jon Hilsenrath’s opinions as a prominent Fed watcher and journalist, but instead to one newsletter writer’s characterization of Hilsenrath’s role and to the unjustified market upheaval that ensued. The characterization was retracted the next day, with an apology in that newsletter. It, too, represents another instance of putting something into writing that turned out to be subject to misinterpretation, this time with a measurable impact on markets.
What I would like to clarify today is that our experience of the Fed offers no grounds for believing that Jon Hilsenrath had anyone whispering Fed secrets into his ear. (And to any reader who concluded otherwise, I must apologize for not making myself clearer.) In his blog, Hilsenrath only offered opinion and analysis (his own).
In my commentary of September 18 I wanted to point out what the newsletter writer was, perhaps inadvertently, implying. My point was how serious those implied allegations were and are. And I wanted to note how they reflected a misbegotten perspective that was generating an inappropriate market response and raising risk premia.
In principle and practice, we advise markets and market commentators to steer clear of attributing insider “Delphic Oracle” status to journalists. As we will learn again in a few hours, the Fed keeps its message sealed until it is time to release it.
David R. Kotok, Chairman and Chief Investment Officer