Note: It is with great sadness we learn this morning of the death of Alan Greenspan, Chairman of the Federal Reserve from 1987 to 2006. His tenure as Chairman was not without controversy and his policies were judged, in hindsight, to be one of the significant contributors to the Great Financial Crisis of 2008-2009. However, his legacy also includes his rejection of a widely accepted economic truism (the Phillips Curve was never underpinned by theory) that an unemployment rate below 6% could not be achieved without significant inflation and his embrace of technology-driven productivity as the path to full-employment with price stability. This legacy looms large over the Federal Reservee even today. May his memory be a blessing, in all its complexity.
The brevity of the most recent Federal Open Market Committee interest rate announcement and the quality of discourse during the press conference that followed have encouraged some fond reminiscing about former Fed Chairman Jerome Powell. There are, of course, words and phrases he used that many have no desire to hear again: “transitory” and “data-driven” still make analysts a bit twitchy when used in any context. One year ago, however, former Chairman (and current Board member) Powell introduced an elegant and thoughtful discussion of the difference between risk and uncertainty, a difference that is often confused and seldom acknowledged. Risk occurs when there is a range of outcomes that are well understood, usually due to the existence of relevant historical data, allowing for the assignment of probabilities to each outcome. In other words, the risk can be measured and therefore priced into household, business, and investment decisions. Uncertainty, on the other hand, is when there is inadequate information or sufficient complexity that the range of outcomes from any action is unknown, with probabilities that are impossible to measure. There is a risk that one’s flight from New York to Los Angeles will be late, and the published on-time record of that flight can be examined to arrive at a decision whether to take that flight. In contrast, there is an uncertainty that a tanker full of crude, sailing from Kuwait to a customer in South Korea via the Strait of Hormuz will actually make it through the Strait at this moment. A probability to the possible outcomes cannot be assigned because the outcomes are not clear; the conflicting narratives of the negotiating parties involved in opening up the Strait have become a morass of misinformation and complicated threats. Small wonder that ship transport insurance is not easy to come by, and ship owners are choosing to “wait-and-see”, hoping that time will provide more information, turning some of the uncertainty into measurable risk. Unfortunately, in this case, time seems to only spawn even greater uncertainty. It should be apparent that the economic consequences of risk are completely different than the economic consequences of uncertainty. Jerome Powell’s remarks last year were in reference to the uncertainty over the effects of a wildly unanticipated, never-seen-before tariff regime; over time, the effects had become better understood and the risks had become measurable by businesses and policymakers, with a pick-up in economic growth reflecting that development. Economies and businesses are adept at measuring and dealing with risk. Uncertainty can bring business activity to a dead halt.
Data to Watch
- US Person Consumption Expenditures (PCE) Index for May, released Thursday, June 25
- US Personal Income and Personal Spending for May, released Thursday, June 25
- Michigan Survey of Consumer Confidence and Inflation Expectations in June, released Friday, June 26
Suggested Reading
Weekly Commentary
Week of June 21, 2026 – Weekly Economic Commentary
Jeanette Garretty
Note: It is with great sadness we learn this morning of the death of Alan Greenspan, Chairman of the Federal Reserve from 1987 to 2006. His tenure as Chairman was not without controversy and his policies were judged, in hindsight, to be one of the significant contributors to the Great Financial Crisis of 2008-2009. However, his legacy also includes his rejection of a widely accepted economic truism (the Phillips Curve was never underpinned by theory) that an unemployment rate below 6% could not be achieved without significant inflation and his embrace of technology-driven productivity as the path to full-employment with price stability. This legacy looms large over the Federal Reservee even today. May his memory be a blessing, in all its complexity.
The brevity of the most recent Federal Open Market Committee interest rate announcement and the quality of discourse during the press conference that followed have encouraged some fond reminiscing about former Fed Chairman Jerome Powell. There are, of course, words and phrases he used that many have no desire to hear again: “transitory” and “data-driven” still make analysts a bit twitchy when used in any context. One year ago, however, former Chairman (and current Board member) Powell introduced an elegant and thoughtful discussion of the difference between risk and uncertainty, a difference that is often confused and seldom acknowledged. Risk occurs when there is a range of outcomes that are well understood, usually due to the existence of relevant historical data, allowing for the assignment of probabilities to each outcome. In other words, the risk can be measured and therefore priced into household, business, and investment decisions. Uncertainty, on the other hand, is when there is inadequate information or sufficient complexity that the range of outcomes from any action is unknown, with probabilities that are impossible to measure. There is a risk that one’s flight from New York to Los Angeles will be late, and the published on-time record of that flight can be examined to arrive at a decision whether to take that flight. In contrast, there is an uncertainty that a tanker full of crude, sailing from Kuwait to a customer in South Korea via the Strait of Hormuz will actually make it through the Strait at this moment. A probability to the possible outcomes cannot be assigned because the outcomes are not clear; the conflicting narratives of the negotiating parties involved in opening up the Strait have become a morass of misinformation and complicated threats. Small wonder that ship transport insurance is not easy to come by, and ship owners are choosing to “wait-and-see”, hoping that time will provide more information, turning some of the uncertainty into measurable risk. Unfortunately, in this case, time seems to only spawn even greater uncertainty. It should be apparent that the economic consequences of risk are completely different than the economic consequences of uncertainty. Jerome Powell’s remarks last year were in reference to the uncertainty over the effects of a wildly unanticipated, never-seen-before tariff regime; over time, the effects had become better understood and the risks had become measurable by businesses and policymakers, with a pick-up in economic growth reflecting that development. Economies and businesses are adept at measuring and dealing with risk. Uncertainty can bring business activity to a dead halt.
Data to Watch
Suggested Reading
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