For years, the Federal Reserve operated like a central bank that really, really wanted you to know what it was thinking. Detailed projections, forward guidance, press conferences, dot plots. New Fed Chair Kevin Warsh is pulling the tablecloth.
Warsh, who took the helm on May 22, has made it clear that the era of the chatty Fed is winding down. His directive to the institution is refreshingly blunt: stop talking so much and start thinking more.
What Warsh is actually doing
At his first Federal Open Market Committee meeting on June 17, Warsh held the federal funds rate steady at 3.50% to 3.75%. The FOMC raised its end-of-year rate projections to 3.8%, up from a previous 3.4%. In plain English: the Fed now expects to cut rates less than it previously signaled.
Warsh has been a vocal critic of forward guidance for years, arguing that the central bank’s forecasts, in his words, “have been abysmal.” He even floated the idea of skipping his own projections entirely.
