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Fed Chair Warsh says must think about a new conduct for monetary policy and we'll be charting a new course so the Fed can make better decisions

Newsquawk Staff ·

  • Exciting, consequential time to be a central banker.

FOMC/Guidance

  • Reiterates not going to give forward guidance.
  • Wants to have good debate with his colleagues on FOMC, and he values their views.
  • Doesn't want to make any judgements now, the Fed is set to meet in four weeks.
  • We'll be an independent central bank, and no changes in independence.
  • If there are obstacles that prevent them from having healthy debate at meetings, should get rid of it, was referring to forward guidance.
  • Would not be surprised if in 12 months in a better path to deliver the mandates of the central bank.
  • Reiterates interest rates should be the dominant means by which the Fed sets monpol.
  • Fed will remain independent after Supreme Court.
  • We'll follow Supreme Court decision.
  • His hope is that in 9-12 months from now they'll be using new tech to understand the economy.
  • There will be dot plots at least for the short time.

AI

  • AI boom is showing itself first and very prominently in the US, trying to monitor these developments, and up to the Fed to decide if AI is inflationary.
  • In terms of the inflationary impact in the near term, can observe it on the demand side.
  • Whether that finds its way into a broader set of goods, Warsh doesn't have any news on that front.
  • Monetary policy spills over between their economies.
  • US likely to be a big winner from AI.
  • Suggests only in the first or second innings of this revolution.

Dual Mandate

  • Fed wants to deliver price stability.
  • Fed must deliver on both sides of its mandate.
  • Labour markets are steady.
  • Supply side solid, and in the price stability business.
  • Looked around, and see that prices are too high.
  • Expectations of inflation over the first four weeks have come down.
  • If anyone thought we'd be happy with inflation above 2%, they'll be disappointed.

Economy

  • Volatility is down, yields are down.

Task Force

  • Next week will likely have news on the leaders on the task force that he's appointed.

FX

  • Declined to comment on the Yen, and says he won't be drawn into it.

Productivity/Growth

  • Over the last year, productivity in the US and structural productivity is in high 2% range.
  • Potential growth looks like it has trended upwards.
  • If last four quarters an indication, reason to be optimistic.

Balance Sheet

  • Asked about what comfortable level he sees the balance sheet at, but again says no forward guidance.
  • No secret wanted balance sheet to be smaller, and has not changed his view in first four weeks at the Fed.
  • If there is a change in balance sheet policy, decision will be well deliberated and communicated.
  • Balance sheet borders on fiscal policy.

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