Federal Reserve Chair Kevin Warsh will disclose the outside experts serving on five newly created task forces next week, including non-American economists and former central bankers, as he pushes forward with his overhaul of the U.S. central bank's operations.
Federal Reserve Chair Kevin Warsh said the central bank will reveal the outside experts staffing five new task forces next week, tapping non-American economists and former central bank leaders to scrutinize everything from the Fed's communications to its inflation framework.
"Some of them would have been folks in seats like this in prior years, some would have been academics in the audience, but we really tried to find the best minds in the economics community, including people from countries outside the U.S.," Warsh said Wednesday at the European Central Bank's annual forum in Sintra, Portugal.
Bloomberg reported Wednesday that former Bank of England Governor Mervyn King, who led the U.K. central bank from 2003 to 2013, would chair one of the panels. The five task forces — covering Fed communications, the balance sheet, economic data usage, productivity and jobs, and the inflation framework — were announced by Warsh after the Federal Open Market Committee's June 16-17 meeting. The panels will serve in an advisory capacity, with any policy changes requiring support from the broader Fed leadership.
The task force initiative represents Warsh's most concrete step yet toward reshaping how the Fed operates, fulfilling campaign promises he made before being confirmed as chair in May. The former Fed governor has been a vocal critic of the central bank's forward guidance, balance sheet management and inflation framework, and has declined to provide any policy guidance since taking office. With inflation running at 4.2% in May — a three-year high — and the fed funds rate at about 3.6%, markets are pricing a potential rate hike to roughly 3.9% as soon as September, according to OIS pricing.
Warsh's decision to include foreign voices on the panels echoes his own past role advising the Bank of England on monetary policy. "We're not asking for de Tocqueville to come to America, but sometimes we need a foreigner to sort of see things clearly," Warsh said, referencing the 19th-century French political thinker who chronicled American society.
The Fed chair used his debut on the global central banking stage to also reinforce his commitment to the central bank's 2% inflation target and its political independence — a pointed message given President Donald Trump's repeated calls for lower rates. "We've been an independent central bank for a very long time," Warsh said. "We're going to be an independent central bank at this moment and you're going to see no changes to that."
Inflation Fight Takes Center Stage
Warsh said that if businesses or households expected the Fed to tolerate inflation above 2%, "I guess they'd be disappointed. We're going to deliver price stability." The remarks suggest a shift from his pre-confirmation stance, when he called for lower rates while campaigning for the job. Since taking office May 22, Warsh has instead signaled a focus on bringing inflation down.
There are signs the inflation threat may be moderating. Warsh cited declining inflation expectations in both surveys and bond market pricing over the past month. Gas prices have also fallen following a peace agreement that ended the Iran conflict, which had pushed inflation higher. Still, hiring has picked up in recent months, and economists forecast a solid jobs report Thursday that would likely show the unemployment rate holding at a low 4.3% — reducing pressure on the Fed to cut rates.
Forward Guidance Abandoned
Warsh declined to specify what steps the Fed would take on rates, consistent with his opposition to forward guidance. "I'm not going to make a judgment now," he said during the panel discussion with ECB President Christine Lagarde, Bank of England Governor Andrew Bailey and Bank of Canada Governor Tiff Macklem. "The tactics, the strategy, and the rest, that's still to come."
At the June FOMC meeting, nearly half of the 19 policymakers signaled support for higher rates this year, while eight favored no change and one penciled in a cut. Warsh did not submit a forecast because of his opposition to providing guidance.
The Fed chair also said artificial intelligence could expand the economy's productive capacity over time and reduce inflationary pressures, though many economists caution those effects could take years to materialize. In the near term, breakneck investment in AI infrastructure is pushing up prices for semiconductor and computing equipment, fueling inflation.
This article is for informational purposes only and does not constitute investment advice.
