Warsh's Fed Weighs Fewer FOMC Meetings
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- Kevin Warsh has curtailed forward guidance, dramatically shortened postmeeting statements, and given cryptic answers in two news conferences since taking office May 22, reversing decades of Fed transparency.
- The Federal Reserve is discussing cutting its eight annual FOMC meetings — described as "mostly hypothetical" by a Fed source — with Minneapolis Fed's Neel Kashkari and Philadelphia Fed's Anna Paulson open to reconsidering the schedule.
- Since Warsh took over, the Dow has gained roughly 3,500 points (7%), while 2-year and 10-year Treasury yields have each risen about 8 basis points — a muted reaction so far.
- TS Lombard's Dario Perkins described the strategy as producing "a regime of continuous market repricing," and DWS's George Catrambone warned less transparency "forces market participants to hedge or have a wider dispersion of outcomes."
- Sri-Kumar Global Strategies' Komal Sri-Kumar flagged a potential bear steepener with longer-term yields outpacing short-term rates, a particular risk given $1.3 trillion in annual debt service costs on $31.1 trillion in Treasury debt held by the public.
- Treasury Secretary Scott Bessent called the Warsh approach a "detox" for markets; Warsh faces a major platform test at the Jackson Hole symposium at the end of August.
Why it matters: The federal government owes $1.1 trillion in debt service costs over the next year on $31.1 trillion in Treasury debt, and Sri-Kumar warned reduced Fed transparency could trigger a bear steepener that raises long-term yields faster than short-term rates. Bond investors and Treasury Secretary Bessent — who endorsed the shift as a 'detox' — would absorb that cost directly through harder financing conditions.
