Fed Speak, The Taper, and Why Everyone Should Just Chill Out
“Fed speak” was a term first used to describe the way that former-chair of the U.S. Federal Reserve Alan Greenspan would couch the substance of his message (if there was any) in the vagaries of economic jargon. This ambiguity served him like an entropic shield, deflecting criticism regarding the accuracy of his statements and diluting the sting of any bad news so much that the markets wouldn’t know if he said anything worth reacting to.
Whether or not Greenspan’s communication style was strategy or personality is up for debate, but the idea of Fed speak has stayed with market watchers. Greenspan’s successor, former Chair Ben Bernanke, was generally more direct than Greenspan was, but still spoke with the same kind of specialized vocabulary unique to central bankers and totally alien to most people. Despite Bernanke’s attempts at a competent forward guidance, markets still overreacted to benign comments and policymakers still parroted the same questions as the media, as if stuck on loop; first, “when will the taper begin?” and now, “when will the taper end?”
These were and are big, important questions to answer, but the Fed has already provided the only answer it will give. In fact, it first answered the question as long ago as December 2012, but the message was couched in Fed speak and the answer so indeterminate that actually coming to terms with it has apparently proven incredibly difficult.