Fed Speak

Posted in Finance, Accounting and Economics Terms, Total Reads: 331
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Definition: Fed Speak

The term Fed Speak, in the monetary policy of the United States, refers to the verbose and wordy statements used by the Federal Reserve Board Chairmen to prevent the financial markets from over reacting to the chairman’s remarks. This strategy was predominantly used by Alan Greenspan during his tenure with the Federal Reserve.


The idea of Fed Speak originated from the fact that financial markets were heavily concerned with any statements the Fed chairmen used to make and most of the times, this led to self fulfilling prophecy. Thus in order to prevent this, the Fed Chairmen developed this way of putting up their statements : Fed Speak , to purposefully detract meaning from the statements using ambiguous and cautious words.


Alan Blinder called Fed speak as “a turgid dialect of English” by the Fed Chairmen in making wordy, vague and ambiguous statements. It was generally the strategy of Alan Greenspan , who was the chairman of the Federal Reserve Board from 1986 to 2006. He used to make vague and ambiguous statements with little substance, and it was not easy to interpret his statements. He is credited with making Fed Speak “ a high art” and popularizing it by the name of Green speak. He once said “What I’ve learned at the Federal Reserve is a new language which is called ‘Fed Speak’. You soon learn to mumble with great incoherence.”


Example: Following a speech of Greenspan in 1995, headlines of New York Times said “Doubts voiced by Greenspan on a Rate Cut”, whereas Washington Post’s headlines read “Greenspan Hints Fed may cut interest rates.”

 

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