(Bloomberg) -- Here are the key takeaways from Federal Reserve Chair Jerome Powell and former Fed Chair Ben Bernanke at a monetary policy research conference hosted by the central bank in Washington on Friday:
- Powell used the opportunity to send a clear signal that he is open to pausing the central bank’s aggressive tightening campaign next month, saying that policymakers can afford to watch the data now that they’ve lifted interest rates as much as they have. The Fed chair was also more scripted than usual, reading from prepared remarks — a sign that he was being very intentional with his messaging.
- When talking about the Fed’s response to the banking turmoil, Powell reiterated that the Fed’s tools for addressing financial stress are separate from its tools for managing monetary policy. However, he notes that they are connected and any slowdown in the economy caused by tighter credit conditions because of the banking stress may mean that the Fed will not need to raise rates as high as it would have otherwise. Still, Powell cautioned, the effects of the banking turmoil are highly uncertain.
- Bernanke and Powell reflected on how the central bank is now communicating much more about what it’s doing and what it plans to do, through press conferences, summaries of economic projections and other forms of forward guidance. Powell said forward guidance helped interest rates move up even before the Fed started hiking borrowing costs, and that’s a good thing. But he said the Fed is more constrained in how much forward guidance it can issue now that there is more uncertainty about the economy and what future policy will be.
- Bernanke listed a few reasons why this era is different from the Global Financial Crisis and the Great Depression. Mainly, consumers are on much more solid ground now than they were during those other crises. Also, the market losses that Silicon Valley Bank sustained came from its Treasuries — which have a clear value, unlike the hard-to-value subprime securities that sparked losses during the GFC.
- Treasury two-year yields inched near 4.34% before Powell spoke and fell by 10 basis points as the bond market digested his remarks. The Bloomberg Dollar Spot Index hit a low of the session as Powell spoke, and snapped a three-day advance.
--With assistance from Isabelle Lee.
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