What Kevin Warsh’s Fed is telling us

Stephen Stanley | August 7, 2026

This material is a Marketing Communication and does not constitute Independent Investment Research.

I have long thought Kevin Warsh would get the Fed job because he argued the institution needed reform, not because he was dovish.  Warsh took office with a mandate to shake things up in a way not seen since Paul Volcker came onboard in the late 1970s to tame runaway inflation.  At his first Federal Open Market Committee meeting as chair, Warsh announced five task forces to provide recommendations from outside experts on key issues related to the Fed’s operations.  Since then, markets have had to adjust to a very different mode of communication and operation than used by prior Fed chairs.  The past two weeks have offered new insights into how Warsh intends to change long-established norms at the Fed, particularly with respect to communications.

Critique of the Status Quo

Warsh served as a Fed Governor from 2006 to 2011.  He played a central role in the Fed’s navigation of the Global Financial Crisis and often acted as Ben Bernanke’s liaison to the financial markets. The two already had a close working relationship: Warsh had served with Bernanke at the White House before both joined the Fed in 2006.

Warsh ultimately split with Bernanke on some key issues.  Most notably, he opposed continuing quantitative easing in late 2010, after the crisis had passed.  This led Warsh to resign from the Fed in 2011. He then worked for Stanley Druckenmiller at Duquesne and joined the Hoover Institution, where he began developing a broad critique of the modern Fed. His central argument: The Fed had succumbed to mission creep and moved beyond its legal mandate.

Warsh argued that the Fed’s frequent use of QE enabled excessive fiscal expansion and pulled the Fed into market interventions better left to fiscal authorities.  He also made a cultural critique of the Fed, suggesting it had taken sides on controversial political issues like climate change and inclusion.  He blamed the latter for the change in the Fed’s policy framework in 2020, which he argued eventually contributed to this decade’s outbreak of inflation.

At a time when the Trump administration was seen as threatening Fed independence, Warsh argued that the institution would be stronger if it focused on its legal goals — maximum employment and stable prices — and avoided unrelated issues.

If Warsh’s reform agenda is indeed the main reason that he was nominated by President Trump, then he holds a wide remit, at least from the administration, to enact reform of the institution.  The task forces are likely to address a number of these issues, though Warsh will still need to convince the rest of the FOMC, many of whom participated in pursuing the very policies and procedures that Warsh finds objectionable, to actually codify reforms.

Communications

Meeting Calendar.  Warsh wants to change not only what the Fed does but how it communicates.  Most notably, Warsh has an antipathy toward the sort of “forward guidance” introduced by Bernanke after the financial crisis and used almost constantly in Fed communications since then.  Weaning the financial markets off of detailed and consistent hints on the intended near-term course of policy is a work in progress.

More recently, additional pieces of Warsh’s visions have dripped out over the past week or two.  First, on July 31, the New York Times reported that Warsh raised the subject of the FOMC meeting calendar at the July FOMC gathering, asking for feedback from other officials on the possibility of changing the calendar.  The NYT article focused on the possibility of trimming the number of meetings from eight per year, perhaps to six.  The Federal Reserve Act requires at least four meetings per year, so there are limited options for the Fed to reduce the frequency of its gatherings.

A subsequent Bloomberg article offered more detail.  People “familiar with the matter” indicated that what Warsh had in mind was perhaps dedicating two of the current eight scheduled meetings for “discussion of a substantive economic topic,” a change that would be consistent with Warsh’s focus since taking office on big picture issues.  That would leave six FOMC meetings at which the Fed would conduct the usual policy debate and vote.

While this might seem like a radical departure, it is worth noting that as late as the Yellen Fed, there were only four press conferences per year, lining up with the release of SEP projections.  There was a broad public consensus, which was backed up by the Fed’s pattern of rate decisions, that only the press conference meetings were “live,” and that policy changes would not be taken at non-press-conference meetings unless there was an emergency.  So, the idea of holding FOMC meetings at which a near-term policy decision is not on the agenda may seem outlandish to some, but it really would not be all that novel.

The other additional detail in the Bloomberg article was that there had been a discussion about whether the schedule of meetings could be better aligned to the economic data calendar.  There were no specifics explored, but I would note that half of the meetings now typically come near the end of a month (for example, the January, April, July, and October meetings this year), and those meetings often immediately precede important economic data releases.  For example, the most recent FOMC meeting in July came one day before the initial Q2 GDP release and June data on consumer spending and the PCE deflators.  Indeed, every one of those four month-end meetings in 2026 immediately precedes the first print for the most recent quarter for GDP (and thus also a set of new PCE deflator figures).  In some cases, those meetings may also precede by just a few days the next employment report.

Thus, there is plenty of room to better align the FOMC meeting calendar with the economic data release calendar.  The devil is in the details, as keeping the meetings relatively evenly spaced out could be difficult if the primary objective is to gather after a flurry of key data is published.

Relationship with the President.  The relationship between Presidents and Fed Chairs has varied in recent history.  Chairman Greenspan was viewed as a valued source of advice on all things economic by Presidents of both parties.  However, over the years since then, the sense within the Fed has become that the Chair and the Fed more broadly should attempt to steer clear of anything that even touches on politics.  Thus, Chairman Powell, for example, would constantly tell legislators of both parties who would try to get him to offer an opinion on various proposals that the Fed had no view and was intent on staying in its lane.  This distance extended to the White House, as interactions between the Fed Chair and administrations have been mostly formal and channeled through the Treasury Secretary.

A Wall Street Journal article released on Wednesday night noted that President Trump has repeatedly called Chairman Warsh since he took office at the Fed.  The clear implication of the headline was that Trump was attempting to exert undue pressure on Warsh, as many felt he had toward Chairman Powell.  However, the details in the article were far different.  It turns out that the sources leaking the existence of these calls were clear that Trump did not even raise the topic of interest rates.  Instead, Trump wanted advice on a number of other economic issues, such as how the conflict in Iran or AI investment was impacting the economy.

My read is that this sort of relationship is certainly different than the recent norm, but it is far from unseemly.  Trump respects Warsh’s economic views on a wide variety of topics (Warsh was reportedly under serious consideration for the Treasury Secretary job during the transition but was said to have expressed to Trump a preference for the Fed Chairman slot).  Trump has plenty of experts within his Administration from which he can solicit economic recommendations, but if he thinks Warsh is a better source of ideas, then there is nothing inherently wrong with tapping into Warsh’s thinking.

To be sure, if Warsh wants to carry on a regular dialogue with President Trump, he will need to be disciplined enough to keep the Fed at arm’s length from the Administration, protecting the Fed’s independence.  This could be tricky.  At the same time, if the ultimate goal is to bolster the Fed’s ability to preserve its independence, it seems to me that the Fed is better served by a Chairman who has a good relationship with the President than by one who is at odds with the President in a manner that, rightly or wrongly, invites antagonism from him.

There can be a vigorous debate about whether Kevin Warsh will be able to walk this slippery tightrope successfully without falling.  My guess, however, is that Warsh himself is quite confident that he can and thus is not as skittish as his predecessors were about holding a direct dialogue with the president.  I also suspect that Warsh would argue that if the Fed sticks to its knitting, getting out of the various “mission creep” areas that he is seeking to extract the central bank from, and succeeds in achieving price stability, then the institution’s independence will be far stronger, more than offsetting the risks involved in holding regular conversations with the president.  In any case, I suspect we will find out a lot more about the trickiness of this balancing act after the FOMC tightens for the first time under Warsh, which seems likely to invite Trump’s disapproval.

Communicating Through the Press.  Chairman Greenspan began the practice of communicating through the press, leaking his intentions before upcoming FOMC meetings in order to guide financial market pricing.  This essentially made the FOMC decision a fait accompli, cutting off debate within the Committee at meetings.  That practice continued under Greenspan’s successors, but there were incidents in the 2010s where details of FOMC meeting discussions were leaked illegally/improperly, and the Fed as an institution was forced to crack down on leaking, whether authorized by Fed leadership or not.  This put an end to the practice of planting policy hints in the days leading up to FOMC meetings, a huge improvement in my view in the Fed’s communications strategy.

Having said that, as in many instances, rules tend to be followed until it is expedient to break them.  At the May 2022 FOMC meeting, Chairman Powell said at the post-FOMC press conference that the Committee would almost certainly not consider hikes of larger than 50 BPs, clear forward guidance that pushed back hard against financial market speculation that a 75 BP move could be on the table in June.  But then the May CPI, which came out on the Friday before the June 2022 FOMC meeting, was disastrously high, and Powell changed his mind.  The problem was that the pre-FOMC blackout was already in place, so he was not formally allowed to give a speech or otherwise publicly offer an alert that the Fed was going to hike by 75 BPs.  The following Monday, there was a Wall Street Journal article suggesting that Fed officials were seriously considering going 75 BPs, a throwback to the “old days.”

In any case, Chairman Warsh has done away with offering the sort of forward guidance that Powell and his other predecessors used to shape financial market and public expectations.  Does this open the door for the occasional leak article when Warsh feels that the markets are getting it wrong?

Enter a Financial Times article that appeared on Thursday.  The main thrust of the piece was that “people familiar with Warsh’s thinking” told the FT that Warsh acknowledged that he had bungled his July post-FOMC press conference.  Warsh reportedly noted that he had failed to properly reinforce his commitment to price stability and that he sowed confusion over whether his emphasis on long-term reform could impact short-term policy decisions.  In particular, I felt that Warsh did a poor job on July 29 by implicitly leaving the door open to the view of some that he would push off any policy decisions until after the task forces came back with recommendations.  More broadly, he offered no clue at all about his thinking on the inflation situation, which left everyone wondering whether he had any intention to back up his tough talk on inflation with action.

In any case, these inside sources noted that Warsh is prepared to hike interest rates if the next inflation readings are hot and if markets increase their expectations of a tightening move.  My initial reaction is that this felt awfully similar to the sort of “Fed source” articles that financial market participants regularly received in the 1990s and early 2000s from Chairman Greenspan.  I am treating this as a legitimate leak authorized by Warsh, not as idle speculation.

One key difference between the 1990s pattern and now is that the FT article comes six weeks before the next FOMC meeting and thus leaves the ultimate call on what the Committee does in September to the results of the data.  Having said that, this is one instance where I would not be happy with a return to the Greenspan days.  The Fed is not in a blackout period, and if Warsh has a message that he needs to get across, he could easily schedule a public appearance of some sort and make his point publicly and without ambiguity.  We should not have to buy a subscription to the FT or the Wall Street Journal or some newswire to know what the Fed Chairman thinks, and we should not have to guess about whether the anonymous source being quoted by a reporter truly is speaking on behalf of the Chairman or is speculating.

Moreover, leaking to the press to manipulate financial market expectations runs counter to Warsh’s push to have financial markets “play the ball, not the referee.”  Are we to conclude that he is only willing to court independent financial market views when they are “right?”  Moreover, there is a very circular element to this FT leak.  Warsh appears to be signaling that he would consider a hike if the markets are pricing it in.  But he clearly seems to be telling markets what to believe, at least about his “reaction function.”  So, which is it?  Who is driving the bus here?  Is the Fed getting an independent signal from the financial markets or are market participants still simply trying to read the minds of policymakers?

Conclusion

Kevin Warsh intends to shake up Fed practices in a variety of ways.  There is plenty of room for improvement at the Fed, though not all of Warsh’s ideas may necessarily be upgrades.  And some of his initiatives may be rejected by the rest of the FOMC.  So, where the Fed lands on a wide variety of issues remains to be seen.  In any case, financial markets are in an adjustment period, trying to understand Warsh’s intentions, his policy leanings, and how he means to communicate.  Events over the past week or so have offered a number of surprising twists in this journey, and there will undoubtedly be more to come.