In his first press conference as Federal Reserve chairman, Kevin Warsh announced he is forming five task forces to study various aspects of monetary policy, from the central bank’s use of data to its handling of the balance sheet.
Warsh was sworn in as Fed chairman last month. In his first Federal Open Market Committee meeting this week, committee members unanimously voted to hold the federal funds rate at 3.5%-3.75%. However, the policy statement issued by the FOMC was noticeably shorter than those under former Chairman Jerome Powell, and Warsh didn’t join his colleagues in providing projections for where future monetary policy may land.
Warsh also suggested that he may not hold press conferences after every FOMC meeting, as has been customary in recent years.
“Financial markets perform best when they react to incoming data,” Warsh said, describing his thoughts on Fed communications. “I think the financial markets are less efficient when they ask the question, ‘How will the Federal Reserve react to that incoming information?’ The more that markets are paying attention to what’s happening in the real economy, deciding what’s good data and what’s less-good data, the more financial markets can price what they believe is the most likely.”
The five task forces will examine Fed communications, balance sheet policy, ways to improve data gathering, productivity and jobs, and the inflation framework used by the central bank. Each will be composed of experts from both inside and outside the Fed. Warsh expects the various teams to be formed within the next two weeks and to release their findings by the end of the year.
“Each task force will serve an objective shared by everyone in the system, shared by everyone around that table that I sat with over the last couple of days: A Federal Reserve that is clear-eyed about its mission, fit for purpose and focused on the future,” Warsh said.
