A Financial Times report said Federal Reserve Chair Warsh is sticking with a sparse communication style even after a sharp sell-off in Treasuries followed his decision not to reveal much about the path of rates. People close to Warsh said he has acknowledged mistakes during his first 10 weeks running the central bank, including failing to reinforce his core message on price stability and creating confusion over whether his longer-term plans to reform the Fed could affect near-term policy decisions. Those people argued the mistakes do not justify abandoning his reform agenda. They also said Warsh would be prepared to raise interest rates at the Fed’s September meeting if inflation data released over the next few weeks comes in strong and markets lift expectations for higher borrowing costs. The same sources said that while Warsh has floated shrinking the Fed’s $6.7 trillion balance sheet as a way to tighten policy, interest rates remain the main tool and would be used at the coming meeting if needed.
Federal Reserve Chair Warsh is maintaining his usual sparse communication style even after a sharp sell-off in Treasuries followed his decision not to disclose many details about the path of interest-rate policy, according to the Financial Times.
Warsh acknowledged communication mistakes early in his tenure
People close to Warsh told the Financial Times that he has admitted making mistakes during his first 10 weeks leading what the report described as the world’s most important central bank. Those included not doing enough to reinforce his key message on price stability and creating confusion over whether his longer-term plans to reform the Federal Reserve might affect near-term policy decisions.
The same people said those mistakes are not enough to justify scrapping Warsh’s plan to reform the Fed.
September hike is on the table if inflation stays strong
According to people familiar with the matter, Warsh is prepared to raise interest rates at the September meeting if inflation data due in the coming weeks is strong and market expectations for higher borrowing costs also move up.
Those sources added that although Warsh has raised the possibility of shrinking the central bank’s $6.7 trillion balance sheet to tighten monetary policy, interest rates remain the primary tool for now and would be used at the upcoming meeting if necessary.
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