Kevin Warsh launches his push to change how the Fed operates

By Victor Reklaitis and Greg Robb

The new Federal Reserve chair rolls out five task forces that will focus on the central bank's communications, inflation frameworks and more

Kevin Warsh held his first press conference as Federal Reserve chair in Washington, D.C., on Wednesday.

Federal Reserve Chair Kevin Warsh on Wednesday announced a start to his efforts to enact sweeping reforms of the U.S. central bank, with his moves including a rollout of five new task forces.

"I'm appointing a task force in each of five areas that are central to the broad conduct of monetary policy: first, Fed communications; second, the Fed's balance sheet; third, our use and reliance on existing data sources; fourth, productivity and jobs in an era of transformation; and last, the Fed's inflation frameworks," Warsh said as he held his inaugural press conference as chair following a two-day meeting of the Fed committee that sets benchmark interest rates. "These subjects are timely, consequential, and in my view, worthy of a fresh look."

At the meeting, Fed officials voted 12-0 to leave rates steady in a range of 3.5% to 3.75% for the fourth straight meeting. Officials released a terse statement that removed boilerplate language and only promised "to deliver price stability."

"Given the terse statement that focused on getting inflation back down, one might wonder why the Fed didn't hike today," said Michael Feroli, chief economist at J.P. Morgan, in a note to clients.

Warsh evaded discussion of the economy, often using the task forces as an excuse, said Stephen Douglass, chief economist at NISA Advisors.

The question of whether Warsh would make a move to reduce the central bank's communications had been looming large for Fed watchers ahead of this week's meeting. He previously had said he thinks the Fed has been talking too much. There are worries about having a more cagey Fed, but there are also experts who support having less Fed talk when there isn't a crisis.

"Warsh was rather evasive during his press conference. On four separate occasions, he punted to the task forces to avoid answering difficult questions that are directly relevant to the near-term policy debate," Douglass said.

Ian Katz, managing director at Capital Alpha Partners, said Warsh saying he has "a task force for that" became something of a punch line during the press conference.

Economists were startled by the scope of the reviews - especially two, on the use of government data and the Fed's inflation framework.

Fed officials have always defended government data, but Warsh struck a different tone at his press conference, calling the monthly jobs report that Wall Street uses as a proxy for the health of the economy "an echo of history."

And having an inflation task force naturally throws the Fed's 2% inflation target into question.

Warsh said the Fed's inflation target would remain 2%, but added that he's focused on the left of the decimal point, suggesting that a 2.9% inflation rate would somehow be satisfactory.

Warsh said he hopes most of the task forces, if not all of them, will conclude their work by the end of this year.

Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives, said the task forces will cause economists to question how the Fed makes decisions until the work is completed.

"For a period of time, it throws everything under question and under the microscope. It created heightened uncertainty about Fed policy," she said in an interview. It remains to be seen if these tasks forces are about improving Fed monetary policy or if they are excuses to implement an agenda of reduced transparency, she added.

Warsh said he's still in the business of "recruiting and finalizing them," and that they will begin work "in the next couple of weeks" and provide a "framing of how they see things starting in the fall."

Warsh said he expects the task force focused on communications eventually will propose "some well-considered changes," including to the Fed's summary of economic projections, or SEP. He said he didn't take part in Wednesday's SEP, which includes the central bank's so-called dot plot that shows the interest-rate forecasts of the Fed's top 19 officials.

-Victor Reklaitis -Greg Robb

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06-17-26 1844ET