Richard Clarida, the Federal Reserve’s newly-minted vice chair, was caught strangely off guard by a rather basic question during a recent Q&A here in Washington.
Speaking at the Peterson Institute for International Economics, Clarida was asked about the Fed’s new subcommittee on communications, which he is set to chair. What will they do?
“The committee was just announced at the September meeting so it’s early days,” he said, adding merely that other members are Governor Lael Brainard, Boston Fed President Eric Rosengren and the Dallas Fed’s Robert Kaplan. But beyond that, he said, “we’re just beginning to assess the priorities so I don’t have anything for you today.”
In fairness, the communications subcommittee is a regularly-occurring subgroup within the Fed that is customarily led by the vice chair. So it’s true that, as Clarida put it, “it takes on a range of issues so the mandate evolves.”
Still, Clarida’s lack of even a vague outline for his own committee’s mission, and his unwillingness to take questions from the audience or reporters at his debut public event in the new role, speaks to a broader communications gap at the Fed that the vice chair’s new subcommittee might be well advised to address.
Here’s the problem in a nutshell: Communications within the Federal Reserve system runs on two parallel tracks. The first is controlled tightly by the board of governors and often aimed at limiting public engagements and news-making generally; the second consists of the communications teams of various regional central banks whose willingness to engage with reporters and the public is often much higher than that of the board.
The issue is compounded by an institutional power gap that runs in the other direction. That is, board governors have a permanent vote on the Federal Open Market Committee that sets interest rates and play a more direct role in bank regulation than regional presidents.
Governors are also presidential appointments as opposed to the 12 district bank presidents, who are selected by their own boards under a controversial system that critics say leads to an opaque lack of accountability. And yet, when it comes to their duties to communicate publicly, regional Fed presidents are usually not shy about taking on a public engagement or speaking to a reporter.
This is a wonderful thing of course, and very much in the public interest. But when the regional Fed talk overwhelms the board’s own thinking, market participants and the public are left with a lopsided view of the central bank’s goals and policy direction.
To his credit, Fed Chair Jerome Powell has already committed to taking one key step that should help redress the imbalance: holding a press conference after each of the Fed’s eight yearly meetings rather than just quarterly as the central bank has done since press conferences were introduced under Ben Bernanke in 2011.
That’s expected to start next year. The Fed meets this week but Powell will not hold a press conference.
Still, the world needs to hear more from other governors, each of whom brings an important and influential perspective to the table. And reporters need to be able to ask these public officials more questions in public, more often.
It is the unwritten policy of the board of governors that its members do not take questions from the press after giving public speeches or on the sidelines of meetings. This should not be the case. Board governors and their staffers are thoughtful and highly-qualified, and their public interactions tend to improve perceptions of the often-maligned central bank, rather than disrupt markets or create any other adverse consequences.
Perhaps Kaplan and Rosengren can bring some of the best of regional bank communications and engagement to the new Clarida subcommittee. That might just give it the sense of purpose the group thus far appears to lack.
This article originally appeared on Forbes