If the Federal Reserve had a word of the year, what would it be?
If the Federal Reserve had a word of the year, what would it be?
It’s the last Federal Open Market Committee meeting of 2023, which means it’s December, which means it’s the time all those dictionaries come out with their words of the year.
The Oxford English Dictionary’s word was “rizz.” Somebody younger than me will have to explain that one.
But I did get Dictionary.com’s word of 2023, “hallucinate.” Hello, ChatGPT! Merriam Webster went with “authentic,” another nod to artificial intelligence.
So that got me thinking, if the Federal Reserve had a word of the year that summed up the zeitgeist for 2023’s monetary policy, what word would that be?
If we went back to last January, a likely contender for Fed word of the year was probably “pain.”
Inflation was over 6%, the Fed was still raising rates fast and furious, and pretty much every forecaster we talked to was some cross of Debbie Downer and Paul Revere: A recession is coming! A recession is coming!
So, economist Skanda Amarnath at Employ America says his Fed word of the year is “fortunate.” Fortunate, aka, a little lucky.
Fed Chair “Jay Powell was saying, ‘There will be pain, there’s going to be pain. We’ve got to see slower growth, we’ve gotta gotta see some higher unemployment,'” said Amarnath. “We didn’t see any of that stuff, but we did get lower inflation.”
Not to diminish the Fed, but it really helped that consumers still had leftover pandemic savings, that the Silicon Valley Bank fiasco wasn’t worse and that energy prices didn’t really go haywire.
Olu Sonola at Fitch Ratings agrees a lot of luck was involved. But he has a different word Jay Powell would probably prefer: “persistence.”
“They have been very very persistent with their messaging,” he said. “They want to get inflation back down to 2%.”
Sonola says unfortunately you could also still call inflation a bit persistent. We’re not at that 2% target yet. That very tricky last mile will have to wait for next year.
I asked Julie Smith at Lafayette College for her best guess for the Fed’s 2024 word of the year.
“So thinking about 2024, the word that comes to mind about the Fed and monetary policy is ‘normalization,'” she said. “We’re going to have to move policy towards a more normal level, moving from this more restrictive monetary policy we have right now.”
Wednesday, Powell suggested they’ll start to move in that direction.
As for my 2024 phrase of the year? How about, “a lunch out for less than $20”?
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