Federal Reserve Chairman Jerome Powell has a bachelor’s degree from Princeton and a law degree from Georgetown, but his first statement after the June FOMC meeting was written in ninth-grade language. It began, “The main takeaway is that the economy is doing very well.”
It marked the opening of the Fed’s plain-English initiative, an effort to make the Fed’s language accessible to the millions of people whose lives and businesses are impacted by the central bank’s actions on interest rates. To make the Fed’s actions more understandable, Powell’s statement has a simple structure, short words, clear language, and little to no jargon. Powell said:
Most people who want to find jobs are finding them, and unemployment and inflation are low. Interest rates have been low for some years while the economy has been recovering from the financial crisis…We think that gradually returning interest rates to a more normal level as the economy strengthens is the best way the Fed can help sustain an environment in which American households and businesses can thrive.
To appreciate just how simple Powell made his statement, we need to compare it to past Fed announcements. On December 18, 2013, former Fed chairman Ben Bernanke opened with the following statement:
The committee decided to modestly reduce the pace at which it is increasing the size of the federal reserve’s balance sheet. The current near zero range for the federal fund’s rate target likely will remain appropriate well past the time that the unemployment rate declines below six and a half percent…
I inserted Bernanke’s comments in the same readability software that rated Powell’s statement at a ninth-grade reading level. The software concluded that a reader would need a Ph.D. or a master’s degree to understand it. Since the U.S. only produces about 1,200 Ph.D. students in economics each year, that leaves millions of people who cannot understand or explain why the Fed acted as it did.
In a New York Times article published after Powell’s press conference, his communication was praised for its simplicity. “He didn’t resort to even a single statistic at the start of his opening remarks,” according to the article. “Books have been written on the Fed and its role in the American economy. But Mr. Powell summed it up in four words, and didn’t even cite the classic description: ‘dual mandate.’ Congress has assigned us very important jobs. And, you know, maximum employment, stable prices.”
Powell’s written statement came in at 285 words. At last year’s June meeting, former Fed chairwoman, Janet Yellen, released a statement that weighed in at hefty 495 words. Powell, unlike Yellen or Bernanke, does not have a Ph.D. in economics and has said he wants the press conferences held after FOMC [Federal Open Market Committee] meetings to be “as clear as possible.” According to an article in the Financial Review, an economics website, Powell’s “folksy pitch to Americans feels light years from iconic Fed chairman Alan Greenspan’s way of deliberately trying to confuse people with his hard-to-decipher Fed speak.”
For the Fed, statements written for ninth graders is good. Third grade would be even better.
In a story I wrote for Forbes.com last year, I featured a fast-growing startup in the health insurance space. The founders of Collective Health, who include physicians and economists, decided to write the company’s consumer material at a third-grade level. Their research found that few people could define even the most basic insurance terms. Even healthcare executives got failing grades. In other words, most people overestimate their knowledge of a particular topic and the terms that go with it. If you want to reach the largest number of people with your message—and make it understandable to them—you must keep your words simple, short, clear and concise.
Nearly every leader should take a page from the Fed’s new plain-English campaign. Customers and consumers are overwhelmed with data and complexity, and there’s no sign the information overload will get lighter anytime soon. Political leaders who want voters to take action on complex issues such as debt reduction, government spending, or climate change must make their language accessible and understandable. Entrepreneurs who want to attract funding for their innovative ideas must make their language clear and concise. Chief executive officers who want to rally their employees around a common vision must make their language concrete and compelling.
It starts with short, simple words a grade-school student can understand.