Market Insider

The Twittersphere may be shaping the Federal Reserve's thinking more than we know

Key Points
  • When the Fed sets policy, it's expected to be shaping its view after reviewing volumes of economic data, reports from its staff and the latest forecasts, but apparently even the Fed chief follows the 280-character headlines on Twitter.
  • The Wall Street Journal, in a long report on Powell's consensus building, mentioned briefly that Powell has followed some economic debates on Twitter.
  • Economists weigh in on what Powell may be reading on Twitter.
Jerome Powell, chairman of the U.S. Federal Reserve, left, hands his mobile phone to Michelle Smith, assistant to the board and director at the Federal Reserve, before a House Budget Committee hearing in Washington, D.C., U.S., on Thursday, Nov. 14, 2019.
Andrew Harrer | Bloomberg | Getty Images

Could the Twittersphere be influencing the Federal Reserve on interest rate policy?

Fed Chairman Jerome Powell apparently has picked up tidbits from economic debates on Twitter that he has an interest in. Powell's use of Twitter was reported by the Wall Street Journal, in a small reference as part of a long article on how the Fed chairman forges a consensus on policy decisions.

"Twitter is a modern communications channel. To the extent the Fed should be cognizant of the debate going on, it makes sense," said Jon Hill, senior rates strategist at BMO. "Everything is on Twitter, from the president to academics to economists to traders. It's another information point."

The Fed reviews reams of economic data in forming its opinions on policy. But Powell's use of Twitter begs the question of how much weight, if any, #inflation carries versus the Fed's trusted inflation measure, the PCE deflator. Or does he look for news under #jobs, #tariffs and #trade, topics that he has said are on his mind. Or is he watching how Fed policy is trending in #repo, #QE [quantitative easing], or even #Powell. It's possible he watches #Econtwitter where his use of Twitter was mentioned Tuesday.


Maybe he's even following a sports team or two, like everyone else.

Powell, who does not tweet, is not the only central banker on the social media service. European Central Bank President Christine Lagarde has her own Twitter account and she, or staff, tweets. She has more than 589,000 followers and only follows 67 accounts, including the Bank of England, other European central banks that are part of the ECB, the IMF, but apparently not the Fed.

"That would be interesting if one could figure out what he follows, who he follows. No one knows what his handle is," said Hill. Perhaps he follows the regional Federal Reserve banks, like the New York Fed, the Cleveland Fed, or San Francisco Fed, or individual officials, like Dallas Fed President Rob Kaplan and Minneapolis Fed President Neel Kashkari.

Maybe he also watches President Donald Trump, though Fed watchers don't believe that he does watch Trump's account, where the president has repeatedly criticized the Fed chief and the Federal Reserve for interest rate policy.

Diane Swonk, chief economist at Grant Thornton, said it's been clear to her that the Fed uses Twitter on a regular basis.

"I know they've looked at my Twitter account," she said. "I've had many people make comments, Fed governors and Fed presidents about what I've actually tweeted. They're looking for more intel, everything from how policy is being perceived to what's happening in the economy."

Swonk said initially she was surprised and it made her think about what she was tweeting.

"It gave me about a 30 second pause, and that's long in the Twitterspere," she said.

As the Fed meets Tuesday and Wednesday, it is dealing with the question of when to move off the sidelines and also the repo market, where the Fed is running special operations to guarantee liquidity in the short term funding market over year end.

The Fed stepped in after short term rates in the overnight lending market spiked in September, due to a cash crunch.

Bond market pros have been anticipating further comments from the Fed and Powell on the topic.

"I''d be curious who he follows on repo stuff. How many people are tweeting about repo? If you only pay attention to the people who are publicly talking about what they're doing, that's probably a different group than the aggregate market," said Hill. "Twitter is good to know what's going on inside the echo chamber...That does not mean what Twitter says is correct."

A Fed spokesperson said the Fed has no comment on the topic of the chairman and Twitter.