Kevin Warsh gaveled to order his first Federal Open Market Committee meeting as Fed chairman on Tuesday. Tomorrow he’ll hold his first press conference. The most interesting thing about it may be what he doesn’t say.
Warsh has spent more than a decade arguing the Fed talks too much. His prescription, delivered to investors last year, ran to four words: “More thinking, less talking.” He thinks the central bank has buried itself in forward guidance, dot plots, and a daily chorus of officials freelancing on every side of every question. He wants the Fed back on page B12 of the business section.
On rates, Wednesday will oblige him. With inflation still elevated from the Iran energy shock, nobody expects a move—the funds rate stays at 3.5 to 3.75 percent, and the conversation around the table has drifted toward hikes, not cuts, later this year. The CME’s Fed Watch tool, which calculates the odds of Fed policy moves implied by prices of federal funds futures contracts, now favors a single hike by year’s end, with an off-chance of two hikes and a 40 percent chance of no hikes. The
The statement will likely shed its “easing bias,” the language hinting the next move is down. Warsh inherits a committee that has stopped wanting to cut, and three dissenters at the last meeting said they wanted the language gone. If anything, that view has likely won adherents. Warsh himself dislikes including this sort of thing in the statements anyway. But that means it would be wrong to see pulling the language as strictly hawkish. Instead, it should be understood as the hawks and the anti-guidance reformers arriving at the same view.
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