Janet Yellen Makes Rookie Mistake in Fed Debut

Janet Yellen is getting a lot of grief over her first news conference as leader of the Federal Reserve for, of all things, speaking too clearly. As Rex Nutting at MarketWatch observes, Yellen spoke for an hour yesterday, "but the market only heard three words: 'around six months.'" Those words came when Yellen was asked when the Fed might start raising interest rates once its tapering strategy ended. The official Fed statement on the matter was predictably vague, but Yellen wasn't: “You know, this is the kind of term it’s hard to define, but, you know, it probably means something on the order of around six months or that type of thing.” The markets interpreted that to mean interest rates would go up sooner than expected and immediately tanked.

"A more experienced central-bank head would have obfuscated and said something vague," writes John Cassidy at the New Yorker. He calls Yellen's debut "awkward," but notes that Ben Bernanke and Alan Greenspan got similarly tripped up in their early days. Yellen wasn't trying to change policy, and investors drew a "remarkably dumb conclusion" in thinking otherwise, writes Clive Crook at Bloomberg. Still, Yellen needs to be careful in what she says. "Investors always want more information, but they're not always good at sifting useful information from noise," he writes. "The Fed could help them by recognizing that sometimes less is more." Adds Peter Coy at BusinessWeek, referring to the Fed's rate-setting committee: "It’s a fair bet that other FOMC members will be suggesting to Yellen that she stick closer to the script next time she addresses reporters." (More Janet Yellen stories.)