Fed holds rates steady in Warsh’s first meeting as chair
Kevin Warsh used his first FOMC press conference to promise price stability while signaling less reliance on forward guidance.
By Hana Yoshida · Markets Reporter
3 min read
The Federal Reserve kept its benchmark interest rate at 3.5% to 3.75% on Wednesday in Kevin Warsh’s first meeting as chair. The decision matters because investors and the White House had been watching for any sign that Warsh would move quickly toward lower rates.
Warsh told reporters after the Federal Open Market Committee meeting that policymakers were united on inflation, saying the committee “will deliver price stability.” He also said high prices remain a burden for Americans, while arguing that recent inflation does not have to define the path ahead.
The FOMC described the economy as still growing at a solid rate, with strong productivity growth and capital investment, according to its statement. Warsh said job growth has matched the expansion of the workforce and that the unemployment rate has changed little.
The Fed’s decision matched market expectations. CME’s FedWatch tool showed a 99.6% probability of no rate change before the announcement, according to Fortune.
Warsh signals a lighter touch on guidance
Warsh also used the press conference to point toward a different communications style at the central bank. He said the FOMC statement had been shortened and said, as a general matter, forward guidance should not be the Fed’s business.
That stance put new attention on the Fed’s Summary of Economic Projections, which includes the dot plot of policymakers’ rate forecasts. The June release recorded 18 responses rather than the usual 19, and Warsh confirmed during the press conference that he did not submit a projection, according to Fortune.
Oxford Economics lead analyst John Canavan wrote before the meeting that he expected the Fed to hold rates and remove a more dovish bias from its statement, Fortune reported. Canavan also said Warsh could later drop some post-meeting press conferences as part of a less-is-more communications approach.
Inflation and jobs leave little room for a cut
Recent data did not support the rate cut sought by the White House, according to Fortune. The Bureau of Labor Statistics said the all-items consumer price index rose 4.2% before seasonal adjustment in its latest report, keeping inflation above the FOMC’s 2% target.
The labor market also gave the Fed limited reason to ease policy. The Bureau of Labor Statistics reported unemployment at 4.3%, a level Fortune described as not weak enough to force a cut aimed at boosting activity.
Warsh’s first meeting also came under unusual political scrutiny. Fortune reported that President Donald Trump and the White House had pushed for lower rates in the final months of Jerome Powell’s chairmanship, using legal action, public criticism and threats of dismissal as part of that pressure campaign.
Powell remains at the Fed as a governor, according to Fortune. Fortune reported that Powell said he would stay until a Department of Justice inquiry into his testimony about Federal Reserve renovation projects was resolved.
Warsh, a former Fed governor under Ben Bernanke from 2006 to 2011, has denied yielding to political pressure, according to Fortune. At the start of his press conference, Warsh said the meeting reflected the Fed’s traditions of rigorous debate, responsibility and accountability.
This story draws on original reporting from Fortune.