Warsh launches task forces to review Feds communications, data sources

During his first news conference as Federal Reserve chair, Kevin Warsh pledged Wednesday to use monetary policy to bring inflation in the U.S. back down to the central bank's target of 2%.

“Persistently high prices are a burden for the American people,†he told reporters. “But the recent past need not be a prologue. I am pleased to report that members of the FOMC are unambiguous and unanimous. This committee will deliver price stability.â€

Earlier in the afternoon the Federal Open Market Committee, or FOMC, voted 12-0 to keep the target range for the federal funds rate unchanged at 3.5% to 3.75%. 

Analysts had almost universally predicted that Fed policymakers would hold interest rates steady. 

On Wednesday afternoon, the committee also published its rate projections, called a “dot plot,†showing that several policymakers think a rate hike may be warranted later this year and prompting U.S. stocks to slump. Warsh confirmed to reporters that he had withheld his own assessment. 

During his news conference, Warsh also repeatedly declined to offer his own forward guidance when asked about where interest rates were headed down the line, and he noted that the committee's June statement was “a bit shorter, a bit simpler, and it dispenses with some older language.â€

“What we’ve given markets is a new chapter for the central bank, some fresh thinking,†he said Wednesday.

Warsh announced that he was launching five task forces to review the Fed’s communications; the central bank's balance sheet; its inflation framework; productivity and jobs; and the “use and reliance on existing data sources.â€Â 

He said the Fed was exploring the use of new data sources and methodological changes to data gathering.

“Most of the data that central bankers and other government officials in the United States consume come with old-fashioned survey methods,†he said, adding that due to low response rates and revisions, data may not be useful in its initial form. “We need to take those error bounds down because we have to make hard decisions in real time.

“I’m really open-minded that there is a lot of new data sources, that we can learn from the private sector, from reforms in the official sector and new analytic techniques,†he said.

Warsh had given lawmakers a preview of his views on data sources during his confirmation hearing in April, during which he spoke about the “regime change†he wanted to implement at the central bank. 

Warsh's path to chair

President Donald Trump nominated Warsh, a former Fed governor, financier and attorney, in January to succeed now-former Federal Reserve Chair Jerome Powell, whose term at the helm concluded in May. 

Powell had opted to remain on as a Fed governor and said he would depart when the Justice Department's investigation into the central bank's renovation of its Washington headquarters was “well and truly.” His term as governor is scheduled to conclude in 2028. 

Warsh was asked about the renovation project Wednesday and said he met with the Fed's inspector general, who is slated to release a report later this summer.

“From my perspective, with a forward-looking glance –– is there anything that we can be doing or should be doing from this moment until the completion of the project to do what we can to be good stewards of taxpayer money?†the new central bank head said. 

Warsh and Powell each get one vote for Federal Open Market Committee interest rate decisions. The other 10 voting members are the remaining five Federal Reserve governors and the president of the Federal Reserve Bank of New York as well as four of the 11 Reserve Bank presidents who rotate in for one-year slots.

The Supreme Court has allowed one of the Fed governors, Lisa Cook, to remain in her role despite Trump's attempt last year to oust her as it considers her lawsuit. A decision is expected from the nation's top court by the end of its term in the coming weeks. 

The FOMC uses the federal funds rate — the rate banks charge each other for overnight loans — as its main monetary policy tool to try to achieve the Fed's dual mandate of stable prices and maximum employment. 

Policymakers traditionally reduce the benchmark rate to spur job creation and increase it to cool inflation. The key interest rate impacts how much the federal government pays to service the national debt and often influences long-term lending rates on loans for homes and cars.

“What I believe is if we do our job, we can make strong growth, low prices and strong employment mutually compatible,†Warsh said Wednesday. “What you heard from the committee today is we’ve got some work to do on the price stability front.â€

Last week the Labor Department said inflation had risen to a three-year high of 4.2%, mostly because of higher gas prices that have climbed after the U.S. and Israel launched a joint military campaign on Iran on Feb. 28. 

Meanwhile, the U.S. job market has seemed to show resiliency amid the Middle East conflict. According to Labor Department figures released earlier this month, employers added 172,000 jobs in May — about double what had been predicted — and the unemployment rate remained at 4.3%.