Federal Reserve Chair Warsh has stuck to his characteristically terse communication style even after his decision to withhold details about interest-rate strategy triggered a sharp selloff in Treasury bonds, the Financial Times reported. People close to Warsh say he recognizes mistakes made during his first ten weeks at the helm of the world's most important central bank, including failing to reinforce his key message on price stability and generating confusion about whether his long-term plans to reform the Fed would influence near-term policy decisions. These people nonetheless insist the errors are not enough to upend his reform agenda. The FT report also cites sources indicating Warsh is prepared to raise rates at the September policy meeting if upcoming inflation data come in strong and market expectations for higher borrowing costs rise. He has raised the possibility of shrinking the central bank's $6.7 trillion balance sheet as a way to tighten monetary policy, but interest rates remain the primary tool and could be used at forthcoming meetings if necessary.
Federal Reserve Chair Warsh is sticking to his deliberately spare communication style, even after his decision to keep details of interest-rate strategy under wraps helped trigger a heavy selloff in Treasuries, according to a Financial Times report.
People close to Warsh said he acknowledges mistakes during his first 10 weeks leading the world's most important central bank. These include a failure to reinforce his message on price stability and allowing confusion to build around whether his long-term plan to overhaul the Fed would influence near-term policy decisions. They argued, however, that these errors don't justify abandoning his reform program.
Separately, citing sources familiar with the matter, the FT reported that Warsh is prepared to raise interest rates at the September meeting if inflation data due in coming weeks prove robust and market expectations for higher borrowing costs climb. Warsh has raised the possibility of shrinking the Fed's $6.7 trillion balance sheet as a means of tightening monetary policy. But rates remain the primary tool, and could be deployed at upcoming meetings should the need arise.
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