Kevin Warsh’s first remarks
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What are the implications of Kevin Warsh's first remarks as Fed Chair?
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The most iconic week in the bond markets continues. A couple of days ago, we brought you some thoughts from the great and the good in bond markets on inflation, US credibility and all that jazz. Since then, it's finally happened. We had an interest rate decision from the US under the new chair of the central bank, Kevin Walsh. It's always kind of exciting for sad people like us when there's a changing of the guard at a big central bank. But this switchover is kind of special for a bunch of reasons. Today on the show, may the wash be with you. What do we learn about the man who, after Rob Armstrong, is now the most powerful person in markets? This is Unhedged, the markets and finance podcast from the Financial Times and Pushkin.
I'm Katie Martin, a markets columnist at the FT in London, back in the basement of FT Towers after I was let out for good behaviour earlier this week. I'm joined by the big fella, Rob Armstrong himself, over in Brooklyn, New York. Rob, and soon I'm going to see you in real life, no?
It's exciting. And I think it's important to note that this will be the rare occasion where we see each other in person and a massive hangover does not ensue. I think we can grow and change. And this is...
Yeah, I'm going to New York very briefly and you are not to take me to a bar and cause me to miss my flight home. So, the Fed decision earlier this week and the press conference from the new chair, Kevin Walsh, I missed this whole thing because I was doing an FT event and then I was watching the football. So... You were watching it all in real time, right? Give us the highlights. I mean, the statement, the written statement was half of the usual length. So did that sort of brevity track through to the presser?
And this was one of the big questions coming in. Warsh has said in the past, he basically wants the Fed to communicate less. He wants to go back to the Federal Reserve tradition of Alan Greenspan, where there's not a lot of talking. Not a lot of sort of thinking out loud by either the chair or the other members of the open market committee. And the markets are kind of left to figure things out. And, you know, one of the questions going in was like, what is the statement going to look like? And then the statement lands at two o'clock yesterday afternoon and it's half the length, like you say. Now, I don't think that is actually a particularly substantive change. In the sense of like, oh, we got all this information before we didn't get a lot of kind of empty verbiage was taken out.
And a lot of this kind of coded talk about the future, which they call forward guidance, was taken out. I'm actually fine with all that stuff going. I've spent five years writing about this stuff several times a year, and I'm not totally sure all that time wasn't wasted. We can have a shorter statement. We can have less forward guidance. That is totally fine. But just reading that statement says, okay, new regime. The letter looks really different.
That's the thing, isn't it? So like on the very sort of surface of it, very boring Fed decision, no change in rates, like no fireworks. But yeah, I mean, I know it sounds like not a big deal, but like halving the length of your statement is a bit of a statement in itself. It is, as you say, it's kind of, OK, new rules.
And as, you know, real finance devotees know about every other meeting when the statement comes out, the committee also releases a set of economic projections where they say, here's what we think rates need to be. Here's where we think unemployment is going. Here's how, you know, et cetera, et cetera. And the most famous part of this statement is the so-called dot plot where each voting member of the monetary policy, no, all members, I'm sorry, of the monetary policy committee,
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