U.S. Federal Reserve Chairman Kevin Warsh holds a press conference following a two-day meeting of the Federal Open Market Committee (FOMC) on Thursday. During his second meeting as chair, Warsh left the impression that a revised schedule could be decided on before the next meeting in mid-September.Evelyn Hockstein/Reuters
Federal Reserve Chair Kevin Warsh is considering reducing the number of regularly scheduled meetings at which the Fed sets interest rates, a potentially seismic move that would mark the most significant change in how the central bank operates in years.
The Federal Reserve’s 12-person policy committee meets eight times a year and votes on whether to lift, lower or hold borrowing costs. Warsh raised the idea of changing the frequency of those meetings at the Fed’s gathering this week, according to four people with knowledge of the discussion who were not authorized the speak publicly.
Warsh, who was presiding over his second meeting as chair, left the impression that a revised schedule could be decided on before the next meeting in mid-September, even if the changes would not be carried out until later.
The Fed declined to comment.
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Reducing the cadence of the meetings – and, in turn, votes on rates – would be by far the most consequential change of Warsh’s tenure. It would mark a break from decades of precedent, reshaping the way the Fed steers the economy and potentially making it less responsive to changes in inflation and the labour market.
Meeting less often would also reduce the information available to Wall Street and the broader public about the Fed’s thinking about the path for interest rates, reversing a decades-long trend toward greater openness.
That would fit a larger pattern that has emerged early in Warsh’s tenure. He has dramatically shortened the policy statements that the Fed releases after each meeting and has provided far less detail about how he views the economy and the appropriate direction for rates. He has also raised the idea of scaling back the post-meeting news conferences that have been the Fed’s practice since January 2019.
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The law that established the Fed in its modern form – the Banking Act of 1935 – requires the central bank’s policy-making Federal Open Market Committee to meet “at least four times each year.” The chair has the power to call meetings, as do any three members of the committee.
The Fed adopted its current schedule of eight meetings a year – roughly one every six weeks – in 1981, when Paul Volcker was chair. It has held to that schedule ever since, although the committee has held emergency meetings, in person or by phone, during periods of crisis.