Kevin Warsh, the new Federal Reserve chairman, is set to introduce himself and his approach to monetary policy in his first post-meeting news conference on Wednesday. This meeting may reveal a new vision for the central bank, as Warsh has hinted at making significant changes to the Fed’s operations.
Warsh’s Approach to Monetary Policy
Warsh has described his plans as a “regime change” in how the central bank operates. This could include fewer news conferences and a rethink of the Fed’s practice of publishing officials’ quarterly economic projections. The market is eager to learn how Warsh views the outlook for interest rates, especially given the recent US-Iran agreement that has reduced the risk of an oil-driven inflation shock.
Inflation is rising, but this does not automatically mean the Fed needs to hike interest rates. Central bankers are looking at what is driving price pressures and whether they are likely to persist. The prevailing view has been that supply shocks are typically one-off events that do not create sustained inflation, so the Fed should “look through” them.
Warsh’s Team and Plans
Warsh has already hired two conservative policy veterans as temporary Fed advisers. He has also proposed for Fed officials to view inflation differently by focusing on alternative measures of inflation, known as “trimmed-mean averages.” These measures capture the underlying inflation rate, not just one-time changes in prices due to geopolitical events or changes in commodity prices.
Original reporting: El Paso News (HLL/CB) — read the source article.
