How one Fed reporter parses “Fedspeak”

Peter Barnes joined Fox Business Network in September 2007, shortly before its launch, and serves as its senior Washington correspondent.

Until 2004, Barnes served as the Washington bureau chief and correspondent for television station group Hearst-Argyle. He has also worked at numerous business programming outlets, including TechTV from 2001 to 2003, where he was the Washington bureau chief.

Barnes served as an anchor and Washington correspondent for CNBC from 1993 to 1998. In 1996, he anchored “Capitol Gains,” an election year weekday morning show on business, economics and politics. Barnes received a Cable ACE Award while at CNBC for a special series on retirement.

From 1985 to 1988, he was a reporter in New York for The Wall Street Journal. He was also a business reporter for the Greensboro News & Record and The Charlotte Observer and has written for The New York Times.

A graduate of Pennsylvania State University with a Bachelor of Arts in political science, Barnes also holds a Masters of Business Administration in finance from the Wharton School at the University of Pennsylvania.

Barnes spoke with Talking Biz News by email in the aftermath of the Federal Reserve’s decision Thursday to keep interest rates the same on how he covers the Fed. What follows is an edited transcript.

What do you do to prepare for an FOMC meeting? 

Read a LOT — recent speeches, comments, interviews, meeting minutes, policy statements, etc. We in the Fed press corps have to be well-versed in “Fedspeak,” which is nuanced.

You have to be aware of what Fed members have said and look out for for even the smallest, most subtle changes in language — they can mean big things! Here is some background on the issue from the Federal Reserve Bank of New York.

Is it easier or harder to determine what the committee is going to do under Yellen?

Harder. When Chair Yellen was a Fed bank president or one of several regular members of the board of governors in Washington, DC, she could speak her mind more freely.

And historically she has been considered more “dovish” — or translating from Fedspeak, more concerned about the Fed’s “full employment” goal than its (legally equal) goal of keeping inflation in check (“hawks” are considered to put more weight on inflation fighting and policies on both affect each other).

But now that Yellen is chair, she has to speak more for the entire organization and also has to reach a consensus on policy moves by the Fed’s policy-setting body, the Federal Open Market Committee, which is made up of 12 members, including regional bank presidents.

The is more difficult and means she may have to set her personal preferences aside more often. But as chair, while she only has one vote, her views tend to carry more weight than others in setting policy, analysts say.

How do you try to explain the significance of their decision to the average viewer?

On interest rate policy in particular, I try to remind viewers that this matters to them on a real and personal level — that the policy affects what they pay to borrow to buy a car or for a personal or business loan and as savers what they may earn on their savings accounts, CDs or bonds.

After getting the statement, how much time do you have to analyze it before going on the air?

We get it on an embargoed basis in a secure location, as we do with many other materials from government agencies that release complicated documents, just a few minutes before the official release time — basically enough time to read it over a couple of times (the Fed statement is usually two pages with double-spaced lines).

This is standard operating procedure across the government. All of us in media and government have an interest in making sure we report the information correctly to the public.

Are there particular things you’re looking for when reading an FOMC statement?

Major and minor changes in “Fedspeak.” An interest rate change is pretty obvious in the text of a statement, but other wording may not be so obvious. For example, after one recent policy meeting, the Fed inserted the word “some” in its sentence to describe how much more improvement in labor markets it would need to see to start raising interest rates.

“Some” reporters missed that word change — and it was of major importance to financial markets because it meant that Fed members felt they were closer to achieving their goal of “full employment.”

How much competition is there to be first to report about the decision?

There is none because the timing of the release to the public is controlled by the Fed–whether in TV or print, we all report the policy statement precisely at 2 PM ET on meeting days as determined by the U.S. Naval Observatory master clock.

Between FOMC meetings, how much do you follow what the governors and presidents are saying?

We follow every word of what they say, again, looking for overt or subtle changes in positions on policy as well as their evaluations of the health of the economy.

How much does reading the Beige Book help you? 

It is helpful but not conclusive on the state of the economy. It is a collection of anecdotal reports of economic activity in each of the 12 Fed bank districts, not a formal data collection like the kind the Census Bureau conducts.

But it includes important “Fedspeak” terms, such as in its description of economic activity in a district. For example, based on years of precedent, we consider the use of the term “modest” in the report to reflect slightly weaker activity than the use of the word “moderate.”

What other types of Fed stories do you do between FOMC meetings?

Mostly stories on speeches by Fed governors and bank presidents  — both are represented on and vote in the FOMC. But the Fed does more than set monetary policy — it is also a bank regulator, so it makes plenty of announcements about regulation that we have to cover, such as on levels of capital banks are required to hold (now higher so that the government can avoid taxpayer bank bailouts in a future financial crisis).

I saw a tweet today about Yellen’s collar being down instead of up and that being an economic signal. Is that the new equivalent to the size of Greenspan’s briefcase?

Ha! At another job at another financial network, I covered the Fed during the tenure of Chairman Alan Greenspan. That’s when one of my colleagues came up with the “briefcase indicator,” which hypothesized that the fatter Greenspan’s briefcase on FOMC meeting days, the more likely an important policy decision was pending.

But of course, that was really just a way to have some fun on (usually dry) meeting days and my sources at the Fed (and later Greenspan himself) told me they used to chuckle about it. But eventually, it got so popular with viewers that I had to stake out the back entrance of the Fed’s HQ in DC with a camera crew to get video of Greenspan’s arrival and of his darn briefcase!

Have not heard of the “Yellen collar” indicator until now — I’ll hold it in the same regard as the briefcase indicator but will be sure to watch for it just in case!