Jon Hilsenrath Is Not Who You Think He Is

Hilsenrath Image

There is a common perception that WSJ reporter Jon Hilsenrath, perhaps one of the most well-connected journalists at the Federal Reserve, is in such close contact with Fed Chairman Ben Bernanke that markets should hinge on his every word.

Stephen Roach even went so far as to assert thatJon Hilsenrath is actually the chairman of the Fed,” saying that “when he writes something in the Wall Street Journal, Bernanke has no choice but to deliver on what he wrote.”

If you subscribe to that notion, then Jon Hilsenrath is probably not who you think he is – and his appearance on CNBC today probably serves as a pretty good example of why that is the case.

Yesterday, after Bernanke’s comments that (1) weakness in the labour market was understated, (2) the rise in Treasury yields was leading to a tightening of financial conditions, and (3) falling inflation – like we’re seeing now – could damage the economy, U.S. stock and bond markets spiked. The market was taking Bernanke’s comments as a “dovish” sign – i.e., he made it sound like the Fed would be accommodative for a longer period of time than the market was already pricing in.

Hilsenrath went on CNBC this afternoon and argues that, in fact, the overall message from the Fed yesterday was “hawkish” (the opposite of dovish), placing emphasis on the minutes of the June FOMC meeting that were released hours before Bernanke spoke. Furthermore, he argued that Bernanke was only saying the same thing he’s already been saying for weeks – that tapering of bond purchases is going to happen, but interest rates will stay pinned at ultra-low levels for a long time.

When Hilsenrath presented that argument, he got a lot of blowback – perhaps because those who view him as a mouthpiece for Fed policy couldn’t reconcile the argument he was making with the market reaction to Bernanke’s comments.

“I don’t know, John,” said CNBC anchor Scott Wapner. “I look at markets across the board that are reacting as if the Fed chairman changed the game at 5:00 yesterday afternoon.”

Markets hardly reacted to Hilsenrath’s comments in the CNBC interview today. Maybe that is a sign that the perception of him as some sort of mouthpiece is fading.

That may represent a notable shift in perception from just a few weeks ago, when a Hilsenrath blog post published on ahead of the June FOMC meeting – titled “Analysis: Fed Likely to Push Back on Market Expectations of Rate Increase” – caused stocks and bonds to rally.

Hilsenrath himself did not suggest in his post that he was delivering any “news” to market participants. Indeed, the headline stated right up front that it was merely “analysis.” But the perception of Hilsenrath as Fed mouthpiece was clearly alive and well, judging by the market’s reaction to the post.

Like any first-rate reporter, Hilsenrath has some excellent scoops. Yet there have also been times when his scoops were clearly something other than the voice of the Fed. Take March 2012, for example, when Hilsenrath reported that Fed officials were considering a “sterilized” version of bond buying. That sterilized bond-buying program never came to fruition.

It sure doesn’t seem like Bernanke is whispering to Hilsenrath what to say next.

After a similar experience in which the market treated him as a mouthpiece for Fed policy a few weeks ago ahead of the June FOMC meeting, the FT’s Federal Reserve correspondent, Robin Harding, put it like this in a tweet:

Market participants would probably be wise to keep this in mind. After all, those who traded on the WSJ blog post a few weeks ago – on the notion that Bernanke was trying to communicate through Hilsenrath – were crushed a few days later, when at the press conference following the June 19 FOMC meeting, Bernanke’s remarks caused stocks and bonds to sell off.

Hilsenrath’s analysis in that post may have been right, but in hindsight, it certainly wasn’t a reason for investors to plunge in headfirst.

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