Philadelphia Federal Reserve Bank President Charles Plosser's speeches had more market-moving impact on Treasury debt than Fed Chairman Ben Bernanke's in 2009, a study shows.
Bernanke's speeches and interviews moved the yield on the two-year Treasury note by a greater cumulative amount than Plosser's during the year, according to research by Macroeconomic Advisers, an economic and monetary policy analysis and forecasting group.
However, Bernanke gave more than twice as many speeches than Plosser, one of the strongest anti-inflation hawks at the Fed. When ranking market influence per talk, Plosser out-punched the Fed chairman.
Plosser's market clout — and similar heft displayed by San Francisco Fed Bank President Janet Yellen — show that markets are watching not just to the central views of the Fed's interest-rate setting Federal Open Market Committee, but opinions at the extremes of the panel.
"It's just as important, especially these days with so much uncertainty, to know the distribution of views within the FOMC," said Antulio Bomfim, an economist with Macroeconomic Advisers.
The group looked at speeches and interviews by the 17 members of the panel. They then monitored the change in the yield in the two-year Treasury over a 2 1/4-hour period bracketing the presentation.
Normally, only 12 of the 17 Fed officials vote at FOMC meetings, with the 12 regional bank presidents rotating the duty every two or three years. Because there are currently 2 Fed board seats vacant, there are only ten FOMC voters.
Surprisingly, Fed Governor Daniel Tarullo ranked just after Bernanke. Tarullo's speeches focus heavily on regulatory issues, and his views on policy have aligned closely with Bernanke's. Since only speeches that dealt with the outlook for policy or the economy were included, only four of Tarullo's presentations qualified for the study.
San Francisco Fed Bank President Janet Yellen, who has a reputation of being among the most strongly unemployment-focused doves on the panel, ranked next in market influence after Tarullo.
A change from the preceding year was the decline in market impact of Fed Vice Chairman Donald Kohn. This likely reflects his close association with Chairman Ben Bernanke's views and the fact that his speeches brought few surprises to market observers, Bomfim said.
Tarullo's impact is likely an anomaly due to the relatively small numbers of talks he gave on the outlook, he added.
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