Task forces.
That’s a summary of what, forgive me, was a somewhat farcical debut for Kevin Warsh, who on Wednesday afternoon in the US made himself a meme.
After unveiling a stripped-down FOMC statement devoid entirely of forward guidance, Warsh regaled the financial media with a plan to appoint five task forces he says will enhance institutional competence on the way to reclaiming for the Fed lost credibility.
Over the course of the ensuing 45 minutes, Warsh referred to his task forces more than a dozen times, repeatedly availing himself of a cringeworthy tagline when confronted with difficult questions: “We have a task force for that.”
The sly grin Warsh donned throughout suggested the memeification risk associated with leaning so hard, so early, into an organizational problem-solving cliché, wasn’t completely lost on the new Fed chair. But… well, suffice to say he’s “Task Force Kevin” from now on.
So, they better deliver. The task forces, I mean. As noted, there are five of them, one for examining the Fed’s approach to communications, one for balance sheet policy, one for assessing the use of, and reliance on, existing data sources, another for analyzing AI, productivity and jobs and one for the inflation framework.
These expert panels haven’t been staffed yet, let alone convened, Warsh appeared to indicate. The process of standing up the task forces will begin posthaste, though. It’s all about finding the “best people” from a range of backgrounds, thereby ensuring a diversity of viewpoints. (Where have we heard that before?)
The end goal, Warsh said, is to create a Fed that’s “clear-eyed about its mission and fit for purpose.” He suggested there are no sacred cows. Everything’s up for review, including and especially the nature and frequency of Fed communications, and perhaps even the regularity of policy meetings.
When asked if the 2% inflation target will be revisited, Warsh said not until the Fed proves it can achieve price stability as defined by 2%. But he also reiterated that he cares far more about what’s on the left of the decimal than the right, a talking point he’s returned to again and again over the past year.
Asked by Colby Smith “how patient” the Fed can afford to be with inflation running as quick as it is currently, Warsh reminded her that “We’ve dropped forward guidance.”
When Smith wondered whether Warsh thinks Fed policy’s actually holding the economy back, he said it depends. In housing, current policy settings probably are restrictive, he assessed, before conceding it’d be “hard” to say the same about financial markets.
At least for the purposes of Wednesday’s session, the market viewed the new dot plot — which showed half of meeting participants expect to hike rates this year — as tantamount to forward guidance. Two-year yields rose sharply, and traders aggressively priced more tightening.
That raises obvious questions about the dot plot’s future under a Fed chair who doesn’t want to issue forward guidance. When asked about the possibility that the dots’ days are numbered, Warsh said — drumroll — “We’ve got a task force for that.”
“I did not submit a dot,” he went on, stating the obvious (the dot plot was short one dot on Wednesday). “For me it’s not helpful.” During the same exchange he hinted that press conferences might eventually be fewer and far between.
“Press conferences are useful, but when you have one, you want to make sure you have something to say,” Warsh remarked. No arguments there.
Warsh also suggested — and this is implicit in the decision to jettison forward guidance — that he’s keen to extricate the Fed from the so-caled “hall of mirrors.”
Financial markets provide critical signals to monetary policy, he said, but those signals are unreliable if all they reflect is investors’ guesses about how the Fed will react to incoming information.
No arguments there either. Just as long as Warsh is prepared for the consequences: Asset prices will almost surely be more volatile in a regime where the Fed stops dialoguing with markets.
When asked about the front-end selloff playing out on Bloomberg terminals all over the world, Warsh declined to comment. Later, he said he’s not concerned about the short-term market reaction to Fed regime change.
And hey, if things get out of hand, Warsh can always just establish a new task force. As one reader joked, “we’re gonna need a task force to keep track of the task forces.”
If he’s serious about driving inflation down below 3% first (without simply switching to a more favorable inflation measure in order to accomplish it), I am all for that. Less communication means investors will have to be more cautious or risk getting too far out over their skis. That would be a good thing IMHO. Likewise, if he has to raise rates 2-3 times to get there I’m fine with that, but Wall Street and the TACO man will not like it.
I strikes me that a lot of folks, including some readers here, are misreading Warsh where “misreading” means giving him the benefit of the doubt. Don’t do that. It’s a mistake.
Warsh has always struck me as a bullsh-tter going back years and years. The whole “I’m an insider-turned quasi-reformist” shtick is red flag to me whenever and wherever I see it. And that’s part and parcel of Warsh’s whole pitch: “I’m gonna shake us out of this groupthink, and I know it’s groupthink because I worked there before, with the groupthinkers who engage in groupthink, and groupthink’s bad. Did I mention how badly I hate ‘groupthink’? If not, I hate groupthink.'” Danielle DiMartino Booth’s another person like that. And Nomi Prins. I could go on and on.
Watch this: https://www.youtube.com/watch?v=sSiBugMF_8M
Any questions?
Church. I watched the video. I haven’t watched Fox News in so long I had forgotten what an absolute clown show it can be. (It was literally like watching an old Vaudeville routine.) They seem to feel Warsh is their boy, and that is a bit unsettling. My point was that I am willing to give Warsh the benefit of a doubt provided he follows through on what he said today, and I mean that (as naive as my sincere willingness to believe can sometimes be). One thing a modern-day Fed chair needs to be able to do is to simply talk investors into believing a rate hike is coming. (Powell was pretty good at that when he needed to be.) Warsh seems to have succeeded at that today, but only time will tell if he means it or not. (Truth be told, if Treasury rates go just a little higher in the coming days, I may actually bite on a few “tenners” myself.) Thanks you for the warning! (But please, don’t ever ask me to watch Fox News again, it was unduly harsh!)
What’s the over/under on Baron Trump to head up the crypto task force?
It remains to be seen, but it looks to me like a typical bureaucratic power move.
I’d expect him to fill the task forces with people who share his views if not people who are especially loyal to him. Decreasing the frequency of Fed meetings and press, while giving voice to the Task Force heads, who are “structuring communications”, reviewing which data sources should be relied on, and themselves front running the actual Fed, etc. all in the name of “enhancing institutional competence” e.g.not relying on the “incompetence” of the governors and their groupthink.
He can’t take away the votes of the governors but he can exercise a lot of pressure.
The 5 task forces sounds like trying to “flood the zone” while using 10-year old boy speak. Seems like a good approach to get this boss to like you.
Isn’t the Federal Reserve itself a ‘task force’ to manage the banking system? Task forces to help the task force….what a farce.
I thought congress, wanting to not to take responsibility itself, gave the Fed 2 mandates, interest rates and unemployment rates. Now the Fed wants to shun it off. Maybe we need referendums from voters…..
He can keep the plans for his task forces (tasks force?) in Al Gore’s lock box.
That’s it right there. That’s the joke. I wanted so badly to call this article “Lockbox” but I just didn’t think enough people would get it.
Warsh getting rid of guidance gives him more cover to be a closet dove and do the bidding of the administration. All of the folks who think that he was hawkish are not seeing the full picture.
Trump is going to get something he will find more useful than rate cuts from his new Fed. That will be the expanded secrecy Warsh plans.
With the task forces all but staffed and running, just two more legs of the new “stool” (if you will) need addressing: appointment of a Czar of some kind, and an institutional renaming — may I suggest the Federal Subserve Board?
“Bureaucracies never die, they only change names.”
–Robert Anton Wilson probably