By Michael S. Derby
(Reuters) -Federal Reserve Chair Jerome Powell made a plea on Wednesday for the government not to cut back too aggressively on its efforts to collect data on the economy because the information it collects strongly benefits the entire nation.
“The data we get right now, we can do our jobs. I’m not concerned that we can’t do our jobs,” Powell said at a press conference following the latest gathering of the central bank’s interest-rate setting Federal Open Market Committee. But he suggested that at some point that may no longer be the case.
Powell said he worried that staff cuts and changes in government reports over time will degrade the information the government produces.
“From our standpoint, and I think the standpoint of businesses and governments and everyone: Having really good data on the state of the economy at any given time is a huge public good,” Powell said. It does not just help the Fed, “it helps the government, it helps Congress, it helps the executive branch” and it helps private businesses.
Calling the United States a global leader in government-produced economic data, Powell said, “I hate to see us cutting back on that.” This data “is a real benefit to the general public” because it ensures people “have the best possible understanding of what’s happening in the economy, and hence, what’s likely to happen.”
Cutbacks have been an area of considerable focus as the Trump administration has targeted huge parts of the government for reductions amid a belief that it will save money. Many outsiders view the costs of these sorts of endeavors as relatively small while paying huge dividends.
Concerns over the issue flared after the Bureau of Labor Statistics earlier this month announced a pullback in the work to collect information for the closely-watched Consumer Price Index. A measure tracking wholesale prices is also to be changed.
Data like the CPI is of particular note because it helps set cost-of-living adjustments for things like Social Security retirement benefits, as well as union contracts. A CPI index based on reduced inputs is one that is less likely to capture what is really going on with price pressures, and that can have big real-world consequences.
Some in the Fed are less happy with the state of data integrity. In a recent interview, soon-to-retire Philadelphia Fed President Patrick Harker said, “We’re increasingly flying blind, or at least half blind … and I’m worried about that.”
The numbers that central bankers rely upon to understand the economy are “not good” and they are not improving, Harker said. The issue, he said, goes beyond mere inflation numbers.
(Reporting by Michael S. Derby in New York; Editing by Leslie Adler and Matthew Lewis)
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