Investors should expect a leaner, quieterFederal Reserve coming up very soon.
That’s Morgan Stanley’s forecast for Kevin Warsh’s debut as Chair of the Federal Reserve which includes a warning to Wall Street about the central bank’s near-term rate path and long-term communications style
Morgan Stanley said when Warsh takes the podium for his first post-meeting press conference at the Federal Open Market Committee June 17, Fed watchers will notice a sharp change in tone from that of his predecessor Jerome Powell. Warsh has been highly critical of forward guidance and economic forecasting tools like the Summary of Economic Projections or “dot plot” that investors have come to rely upon. He could very likely refuse to answer questions from the media about his stated desires for a “regime change” that includes scaled-back communications and a smaller balance sheet. “We would also not be surprised if he declines to answer certain questions, particularly those about the expected future path of policy.
If Chair Warsh is serious in his belief that the Fed talks too much and forward guidance injects as much volatility as it removes, then he may choose to limit his forward-looking remarks,” according to the June 12 note emailed to TheStreet. That could include a significant scaling back of future policy hints and a reduced number of media briefings, the note said. Fed keeps rates steady thus far this year The FOMC continued to hold the benchmark Federal Funds Rate steady at 3.50% – 3.75% at its April 30 meeting, Powell’s last as Chair.