Warsh wants a Fed that plays a smaller role in markets

Federal Reserve Chairman Kevin Warsh is contemplating reducing the number of Federal Open Market Committee (FOMC) meetings, according to Barclays analysts Michael McLean and Jonathan Millar. This move, they suggest, reflects a broader effort to reconsider the central bank's role in financial markets and its communications strategy.

The current FOMC meets eight times a year, a schedule that dates back to 1980 under Chairman Paul Volcker. Warsh has previously indicated that four meetings might be insufficient, though he didn't explicitly propose the current eight-meeting frequency. The proposed change comes as part of a wider discussion on the Fed's communications, balance-sheet policy, and influence on asset prices and market expectations.

While Warsh might have the authority to adjust the meeting schedule unilaterally, he is expected to seek broader committee agreement, mindful of the Fed's consensus-driven culture. A reduction in meetings could aim to diminish the Fed's impact on markets, lessen market reliance on Fed signaling, and encourage greater reliance on economic data and market prices.

However, Barclays warns that such a change could reduce the committee's ability to respond swiftly to economic shifts, limit opportunities for explaining policy interpretations, and intensify market focus on individual decisions. The debate, Barclays argues, is more about the Fed's communication and intervention policies than the ideal number of meetings.