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The shift is about more than clearer communication and punch lines. What's really at stake is a plan to make the Fed a more transparent and accessible institution. When Bernanke first showed up at the Fed as a governor in 2002, he started eating in the cafeteria, much to the surprise of younger economists, who weren't used to governors joining them for lunch and talking shop. When he returned as chairman in February after an eight-month stint as head of the President's Council of Economic Advisers, he resumed his lunchtime habits, not locking himself away in the Fed's private dining rooms. He plays pickup basketball at the Fed gym, posted his minivan for sale on the Fed's electronic bulletin board and showed up at the Fed's July 4 barbecue with his wife, who teaches Spanish, and one of his two children, home from college for the summer.
Bernanke grew up in a small South Carolina town, where his father was a pharmacist and his mother a teacher, an upbringing that still reminds him of the people behind the statistics he pores over daily. "It gave me a different perspective," Bernanke told a local newspaper in 2004.
On the policy front, Bernanke is trying to quicken the long, slow march of frankness at the Fed. Before 1994, the Fed didn't even announce when it was moving interest rates. Bernanke has set up a subcommittee to look at ways the Fed can talk more substantively with investors and the public, and last week he put the Fed forecast--which predicts that real GDP will increase about 3.25% this year and next--at the center of his testimony, a move designed to help people better understand where things are headed. Bernanke is a proponent of explicitly stating the Fed's goals for inflation, in order to anchor expectations so that fear of inflation doesn't become a self-fulfilling prophecy.
Bluntness is of limited value in Washington, however, as Bernanke quickly found out. His cards-on-the-table approach has roiled markets more than once. In April he told Congress that the Fed might pause its interest-rate hikes, a comment that helped send the stock market soaring, since higher rates siphon money away from equities. A few days later, he commented to a reporter that his remarks had been misinterpreted--and she repeated that on air. The market took a dive.
Even though Bernanke is hardly the first Fed chairman to set markets atwitter, he has become slightly more judicious in his remarks. (He has since admitted that his comment to the reporter was a mistake.) And the markets have begun to adapt to the new voice of the Fed--a voice that conveys innuendo and is clear about how unclear the economy can be. As it is now. "He's going to say what he means," says David Wyss, chief economist at Standard & Poor's. "And we have to get used to it."
The greatest drag so far on Bernanke's effort to be more straightforward may be the economy itself. No one, including the Fed, seems to know quite where we are in the interest-rate cycle. The prices of oil and other commodities have gone through the roof, and consumer prices continue to creep upward a bit more than economists would expect, yet the housing market is downshifting and paychecks are relatively constant.