Federal Reserve Chair Kevin Warsh said on Wednesday that the Fed will not provide forward guidance on interest rates, and added that policymakers will have a "good family fight" when they meet again later in July.
Speaking on a panel alongside other leading central bankers at a European Central Bank event in Sintra, Portugal, Warsh expressed public support for ECB President Christine Lagarde’s recent defense of the ECB’s move to stop outlining a predefined policy path for markets.
"We have found common cause," Warsh said. "President Lagarde’s answer on forward guidance I couldn’t have said it better myself."
Warsh, who presided over his first Fed gathering last month, has disclosed plans to make wide-ranging changes to how the central bank operates. Among those initiatives is the creation of a task force charged with reviewing the Fed’s approach to a range of internal functions - from how it communicates with markets and the public to how it conducts economic assessments.
On Wednesday he restated the central bank’s aim to "chart a new course so we can make better decisions and do the right thing."
Context and implications
The chair’s remarks at the ECB-hosted panel in Sintra underline a shared transatlantic perspective on the value of stepping back from formal forward guidance as a policy tool. Warsh’s comments aligned directly with President Lagarde’s public rationale for removing explicit forward-looking guidance from the ECB’s communications.
At the same time, Warsh signaled an internal review of the Fed’s operational and communication practices through a task force created after his first meeting leading the Federal Reserve. The task force is described as examining a broad set of processes without further detail provided at the panel.
What we know
- Kevin Warsh declined to provide forward guidance on interest rates during a panel in Sintra, Portugal.
- He praised ECB President Christine Lagarde’s defense of the ECB's decision to stop offering forward guidance, saying, "We have found common cause," and, "President Lagarde’s answer on forward guidance I couldn’t have said it better myself."
- Warsh reiterated plans announced at his first Fed meeting to overhaul aspects of the central bank’s operations, including a task force to review communication and economic assessment practices, and said the Fed wants to "chart a new course so we can make better decisions and do the right thing."