April 27, 2011 -- Westminster Abbey and the Royal Wedding are so overhyped; the historic story of the week will take place on C Street in Washington, D.C. today.
At 2:15 p.m. ET, Ben Bernanke, chairman of the Federal Reserve, will make waves in the world of economists and Wall Streeters. For the first time in the 98-year history of the nation's central bank, the chairman will talk to the press after an interest rate decision, fulfilling a promise he made at his first confirmation hearing back in 2005.
At the time he said, "Under Chairman Greenspan, monetary policy has become increasingly transparent to the public and the financial markets, a trend that I strongly support."
Most Fed watchers don't expect Bernanke to make any surprising observations about the economy. The Fed almost certainly won't ratchet up interest rates or change the course of the widely-known QE2 program to boost economic recovery. Instead, Bernanke will likely take the podium to reinforce the post-meeting statement issued earlier in the afternoon and underline the observations the Federal Reserve's staff economists make in their updated forecast issued as a part of the release.
But the importance of the moment shouldn't be dismissed.
This event marks a new chapter in the history of U.S. central banking. The new transparency will allow the Federal Reserve to make its case for monetary policy directly to the public. Twenty-first century-style economic Glasnost.
The press conference, "whose ostensible purpose is to add more transparency regarding Fed policy, is really designed to help repair its image with the general public, a process that began when Bernanke first appeared on '60 Minutes,'" writes Bernie Baumohl, chief economist at The Economic Outlook Group. "The press conference serves multiple purposes. It helps explain the Fed's role in the economy, improves public trust in the central bank, and can be used discreetly as a platform to place more pressure on Congress to reduce the swelling budget deficits."
Chairman Bernanke isn't the first central banker to take the message to the press. His colleagues at the European Central Bank and Bank of England have been doing this for years. He's likely taken some pointers about handling the press from Jean-Claude Trichet and Mervyn King, his European counterparts. It's been reported that he's even done a few practice runs with Fed staffers to prep for the big day.
At a moment when the Federal government's deficits and debt limits are becoming the central issue of the nation's political dialog, Bernanke's press conference debut will give the Fed a more consistent voice and platform in the public sphere.
The lack of transparency during the financial crisis led to criticisms of the Federal Reserve's role in the economy, with members of the conservative Tea Party movement calling for a dissolution of the Fed or a Congressionally-mandated opening up of the once-secretive central bank. Taking the podium might blunt some of the critics, assuming the public both hears and understands what Bernanke says.
No matter what the questions or answers, tomorrow marks a big day in the history of the Fed. Two decades ago, the Federal Reserve kept its interest rate decisions out of the public eye, not even issuing a press release when the Fed Funds rate target changed. Glasnost, indeed.