In everyday life, if you inadvertently cause confusion with something you say, it makes sense to try to correct the situation.

That goes for professional settings and interpersonal relationships too. But it doesn’t necessarily apply to central bank communications.

As a central banker, the more you talk, the higher the chances of traders misinterpreting something you say and enshrining that misinterpretation into market pricing. That’s why it’s better to i) not talk or, in the era where you have to, ii) be a PhD economist. Part of the curriculum for PhDs in economics entails mastering a brand of opaque doublespeak that’s amenable to all interpretations simultaneously, and thereby conducive to the “roundtrip” press conference. That’s the “soft landing” of central bank communications: Asset prices are unchanged by the time you finish speaking compared to when you started.

By contrast, someone who favors “plain English” — someone like Jerome Powell — is doomed to rattle traders at regular intervals. I warned very early on (i.e., in 2018) that Powell’s well-meaning commitment to speaking in layman’s terms while communicating about monetary policy was destined to go wrong, and it has. On too many occasions to count. I used to keep an annotated chart of his communications faux pas, but it got too crowded to be legible. Some missteps were a bigger deal than others — “long way from neutral” and “auto-pilot” stick out, but the list of minor infractions is long.

Generally speaking, such missteps aren’t a big deal in equities, which are mis-priced pretty much all the time anyway. If you accidentally trigger a 5% selloff, it’s usually a “no harm, no foul” kind of thing by next week. But in rates, it can be highly problematic. Through mis- or over-communicating, policymakers can find themselves in a hall of mirrors vis-à-vis the bond market and STIRs. That’s not a good place to be.

On Tuesday, Jerome Powell stated the obvious about the terminal rate in prepared remarks for a Senate hearing: The peak for Fed funds is likely going to be higher. He also said that, depending on the evolution of the data, the Fed might have to consider stepping back up to a 50bps hike cadence, at least for one meeting.

Was Powell “hawkish”? Yeah, I guess. Was anything he said surprising? No, not really.

But Powell didn’t say it quite “right,” so markets did what markets will do: They reacted. Most obviously, twos sold off hard, flattening the 2s10s to new cycle lows, which in this case meant a new “since Volcker” inversion extreme beyond 100bps.

Traders also priced higher odds of a half-point escalation at this month’s meeting. OIS had the March gathering priced at ~40bps — so, better odds of 50 than 25 — and terminal rate pricing hit 5.65% for the September meeting.

Note that the figure above is approximate. Constructing a homemade time series for the real-time terminal rate isn’t straightforward. The chart is representative, but it may be a few basis points off here or there.

Tuesday’s action in rates was good for a few headlines, but to quote someone who should’ve campaigned a little harder into the home stretch, “What difference at this point does it make?” Terminal rate pricing was already ~65bps higher versus where it was when Powell spoke at last month’s press conference. If it was a little higher on Tuesday, or if the curve was a little more inverted, it doesn’t change the overall zeitgeist.

So, there was no real reason for Powell to fine-tune the message. He didn’t say anything unpredictable on Tuesday. He was “hawkish,” sure, but it’s important to remember who we’re talking about here. This is “plain English” guy. This is “long way” Jay. “Auto-pilot” Powell. He’s not your man if you’re looking for finesse.

What you didn’t want to do if you were Powell on Wednesday, was inject any more confusion into the situation by trying to “correct” a mistake you didn’t make. But, this is Powell, so sure enough, he felt compelled to ad lib a walk-back “If — and I stress that no decision has been made on this — but if the totality of the data were to indicate that faster tightening is warranted, we’d be prepared to increase the pace of rate hikes,” he said Wednesday, while regaling House lawmakers with a slightly modified version of Tuesday’s remarks.

That interjection — the “stressing” that the outcome of the March meeting hasn’t been decided — was wholly unnecessary, and only served to make a confusing situation that much more convoluted, at least to the extent it suggested Fed communication isn’t on an even keel, but rather is responding in something like real time to the market’s interpretation of data (e.g., “Oh, hot data, we better price some chance of a 50 this month”) and then, to the market’s interpretation of Fed speak (e.g., “Oh, Powell acknowledged a higher terminal and the possibility of a 50, we better invert this sucker another 10bps and then sell stocks”).

Powell also said Wednesday that the Fed isn’t on “a pre-set path,” which is exactly the same thing he said in January of 2019, while executing his famous “pivot” under the watchful eyes of Janet Yellen and Ben Bernanke, who were seated right across the stage from him.

This is suboptimal to put it nicely. Wall Street Journal “Fed whisperer” Nick Timiraos was quick to point out Powell’s backpedal on social media, Bloomberg ran a story on it, and so on.

And what does everyone get for their trouble? Nothing. In the end, we “learned” that the March meeting hasn’t happened yet, that the Fed will be looking carefully at this month’s data and that if there’s anything worse than central bank miscommunication, it’s surely central bank over-communication.