The Federal Reserve, led by new chair Kevin Warsh, has begun to reduce its guidance to financial markets. This change may lead to more volatile markets and higher interest rates for consumers and businesses.

Warsh’s Approach

Warsh believes that financial markets have become too dependent on Fed guidance. He wants investors to gauge where the Fed may move next by examining economic data and making their own judgments.

The Fed’s statement on its interest-rate decision was reduced to 132 words, from 341 in April. Warsh also announced that the Fed will set up five task forces to examine its communications, balance sheet, and other areas.

Impact on Consumers

The impact on consumers is likely to be modest, with mortgage rates perhaps a quarter-point higher than they would be otherwise. However, this change may lead to more violent swings in stock and bond prices.

Previous Fed chairs have seen benefits to more communication, as it helps guide the markets in the direction the Fed wants. However, Warsh’s view is that financial markets have become too dependent on Fed guidance.

Original reporting: KTBS 3 (Shreveport) — read the source article.