How Kevin Warsh Wants To Change The Fed

Today's hearing revealed Kevin Warsh's perspective and motivations for seeking the Federal Reserve chair position. Warsh believes the Fed has largely failed since the financial crisis, asserting that current practices are detrimental in a rapidly changing world. He aims to lead a reform-oriented Fed to benefit the American people, fostering an environment where top talent can excel. As an economics reporter for CNBC, I covered Warsh's nomination hearing in Washington, D.C. A key point Warsh emphasized was his intent to eliminate forward guidance, a policy where the Fed signals future decisions to markets. He disapproves of the "dots" where Fed members project interest rates and wants to curb constant public commentary from Fed officials, though he might still hold some press conferences. Warsh also plans to redefine how the central bank approaches inflation, currently tracked using "core PCE" (personal consumption expenditures, excluding energy and food). He proposes collaborating with the Bureau of Labor Statistics to alter the underlying inflation metrics, a significant change. Regarding the Fed's post-crisis asset purchases, Warsh, who left the Fed in 2011 due to objections to these plans, believes the interest rate tool is fairer and more effective than the balance sheet tool, which he argues disproportionately benefits those with financial assets. A significant concern during the hearing was Warsh's holdings in the "Juggernaut Fund," an opaque financial instrument. He holds at least $100 million in this asset, but details are scarce. The Office of Government Ethics noted his non-compliance regarding these funds, posing a disclosure problem. Despite this, Republican support suggests his nomination is likely to proceed.