A public debate has broken out inside the Federal Reserve over a basic question: how much forward guidance should the central bank give markets?
According to the account cited in the source, Fed Governor Christopher Waller used remarks at a Reuters-hosted event on Thursday to spell out how he thinks the central bank should communicate. He said effective monetary policy communication should serve three goals: explaining the current policy stance, setting out the policy outlook, and using forward guidance in specific circumstances.
Waller answers Warsh’s effort to downplay forward guidance
Waller’s comments were a response to new Chair Warsh and his earlier line about 「playing the game, not watching the umpire」. Warsh’s point was that investors should pay closer attention to incoming economic data than to the Fed’s own projected path. That was widely read as a clear rejection of forward guidance.
Waller pushed back with a baseball analogy of his own. Markets, he argued, do not need the umpire to make a mechanical call on every pitch. They do need a basic sense of what counts as a strike and what counts as a ball.
Warsh had already softened his position somewhat in remarks at last week’s Jackson Hole conference. He said more clearly that the Fed would act against inflation running above target, but he also maintained that the central bank still cannot 「provide a mechanical, tested standard answer」.
During the conference, Kansas City Fed President Jeffrey Schmid was asked whether he was part of the Fed’s newly formed communications working group. His answer — 「not really」 — added to the impression that internal coordination remains limited.
Warsh’s July case for changing how the Fed speaks
When Warsh introduced his 「focus on playing the game, not the umpire」 analogy in July, the argument was aimed at two tools. One was an overly explicit reaction function, such as a policy response tied tightly to something like the Taylor rule. The other was forward guidance in its usual form.
The logic behind that position is that too much reliance on forward guidance could weaken the Fed’s ability to respond flexibly to data and leave it exposed when economic conditions change quickly.
Warsh had also promised a broader overhaul of how the central bank communicates with the public, including scrapping forward guidance and cutting back on speeches and official remarks. Bond investors criticized that approach in July, saying it did not provide enough information about the economic outlook.
Waller argues for keeping a transparent framework
Waller is more cautious about that shift. His view is closer to the traditional central bank approach that treats transparency as a way to steady expectations and reduce market volatility.
He is not arguing against discretion. He said he agrees that forward guidance is not appropriate at all times.
Still, in his view, a fully blurred policy framework would also hurt markets. His baseball comparison was meant to show that market participants need a rough picture of the Fed’s reaction function — the kind of deviation in inflation or employment that would usually trigger action.
Waller said giving businesses and households a clearer sense of the policy path helps the public form better expectations. As he put it, 「But when it is actually needed, I think it should be used.」
The clash is landing in a tense bond market
Warsh himself had described the matter as a 「family dispute」.
But the argument is now unfolding in public speeches, and its effect has moved beyond an internal policy discussion.
At the same time, the bond market is in an especially sensitive stretch. Global yields have climbed to their highest levels since 2008.
U.S. Treasury Secretary Bessent has announced an expansion of the buyback program for long-dated U.S. Treasuries, prompting broad debate over the boundaries of policy tools.
Warsh’s push for the Fed to keep shrinking its balance sheet has added another layer to that backdrop. With bond-market pressure and policy communication questions colliding, demand for a clearer Fed framework has become harder for investors to ignore.
Until the Fed settles on a unified communication framework, markets may feel they still have to both play the game and watch the umpire — especially when the umpires themselves are still debating where the strike zone starts and ends.