Kevin Warsh promised to restructure the Federal Reserve, and his October meeting showed he meant it. In addition to deciding to keep interest rates at 3.75% to 4%, the Fed chairman also unveiled a plan that one strategist called “the most ambitious overhaul of the way the Fed operates in decades.”
The change goes to the heart of how markets track the Fed. This is the first change to the central bank’s meeting calendar since the early 1980s, when the Federal Open Market Committee reduced its schedule from 12 meetings per year to eight.
How fewer meetings could influence monetary policy through rate votes
The number of meetings has not changed, but the purpose of the meetings has. On October 28, Warsh told reporters: “We believe that eight FOMC meetings per year is an appropriate number.” The Fed said that starting in 2027, “one meeting will be dedicated to discussing broad monetary policy strategy,” and he expected that by 2028, “two meetings will be dedicated to strategy and six meetings will be used to formulate policy.”
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These strategy meetings look very different from regular meetings because there are no rates votes. REX Financial’s Bill Birmingham sees the obvious trade-off. “With fewer guidance and decision points, there has to be more pressure on each rate move,” he said.
The exact calendar is still being worked out. One option would be to maintain the current six-to-seven-week cadence and have two meetings without voting, while the other would have six evenly spaced voting meetings and two thematic meetings. Warsh’s outside working groups are expected to take charge of the Fed’s five business areas around the end of 2026, though he said some may not meet the deadline.
This idea is not entirely new. Before the 2008 financial crisis, six of the eight meetings were single-day meetings, with the other two adding a second day of meeting topics. Ben Bernanke introduced post-meeting press conferences in 2011, according to Bloomberg. In 2012, the Fed moved to a fixed two-day schedule, and Jerome Powell subsequently expanded press briefings to every meeting.
Why Kevin Wash wants a change
Wash sees the move as a way to think bigger.
“This is an institutional choice that affects the nature and quality of our deliberations,” he said. Getting the policy right “involves assessing recent developments at timely, regular and informed intervals”, but the committee also needs space to “focus, as I say, to the left of the decimal point”.
There is also a market angle. Warsh said he hopes investors will not be driven by their expectations of the Fed’s actions. “We’re trying not to interfere with that market signal,” he said of the Fed’s withdrawal from forward guidance earlier this year.
The calendar is part of a broader reset. At his first meeting as chairman in June, Warsh said, “We abandoned forward guidance,” and the post-meeting statement was reduced to just 132 words. He also established five working groups, one of which was responsible for press conferences and communication tools such as click pictures. According to TheStreet, he also vowed that “we will achieve price stability” as the inflation rate has been above the Federal Reserve’s 2% target for five consecutive years.
He has since repeated the message. Warsh warned at the Jackson Hole conference in August about the “hall of mirrors” problem, in which markets rely on guidance from the Federal Reserve, which in turn relies on market prices. “Wash will no longer signal rate changes,” said Gene Goldman of Cetera Financial Group.
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How Wall Street will respond to this change
Fewer rate votes could make each one more important. Occidental College economist Andrew Jalil said the shift “could, paradoxically, have a greater impact on financial markets than otherwise would have been the case.” He added, “Financial markets are very concerned about what the Fed is going to do.”
The Fed may also become less nimble. It can still hold emergency meetings, but Jalil said policymakers may be reluctant to do so because investors may want to know what the Fed knows. He also said that less clear guidance could leave the market “trying to guess more about where the Fed is headed.” Joanne Hsu of the University of Michigan added that consumers anticipating rising inflation may buy earlier, which could push up prices, Marketplace reported.
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Timing is another concern. According to Bloomberg, Richmond Fed President Tom Barkin has his own dissatisfaction with the current setup: “I really don’t like having an FOMC meeting and then going out and getting the jobs report on Friday.”
Some investors already expect the process to be bumpy. Birmingham said he expected “volatility will increase until the inflation target is reached.” PGIM’s Robert Sockin called the October pause “confusing” and predicted four more rate hikes, with the next in December.
What investors should pay attention to next
The meeting on December 8-9 is the next big test. CME FedWatch shows there is about a 78% chance of another 25 basis point rate hike following the 10-2 vote in October. Both Gov. Lisa Cook and Cleveland Fed President Beth Hammack want to raise interest rates immediately. It was also the last meeting before the Nov. 3 midterm elections, and Conzo said Wash explicitly ruled out politics as a factor in the decision.
Wash offered no hints. “If there’s no emergency, if there’s no crisis, I don’t believe in forward guidance,” he said in October. He also noted that inflation “remains high” and despite tighter financial conditions, “I am unwilling and unable to call it austerity.”
This leaves a long gap in the market to fill. There is no Federal Reserve meeting in November, and Realtor.com pointed out that the market expects two to three more interest rate hikes in the next six to eight months. Under Warsh, investors may have to get used to waiting longer and speculating more between rate decisions.
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