Federal Reserve Chairman Kevin Warsh is reportedly weighing a cut to the number of scheduled FOMC meetings. Barclays analysts say the move reflects a broader push to shrink the Fed's footprint in financial markets, and warn it carries real trade-offs for how nimbly the committee can respond to the economy.
Warsh is reportedly considering reducing the number of scheduled FOMC meetings, a move Barclays analyst Michael McLean and economist Jonathan Millar say reflects a broader effort to rethink the Fed's role in financial markets. They view the proposal as part of a wider discussion over communications, balance-sheet policy and how far the Fed should shape asset prices and market expectations.
Where the eight-meeting calendar came from
The Federal Reserve Act requires the FOMC to meet at least four times a year; the committee currently holds eight. That calendar dates to 1980, when then-Chairman Paul Volcker cut the schedule from ten meetings to eight to align with a new operating framework targeting bank reserves rather than the federal funds rate.
That framework was abandoned within three years. But the eight-meeting calendar endured, which Barclays says shows how seemingly procedural changes can accompany broader institutional reforms.
Warsh's own preference
At his April confirmation hearing, Warsh told Sen. Ruben Gallego that four meetings were not enough, though he suggested more than four would be appropriate. Barclays believes Warsh likely has the authority to change the calendar unilaterally but is unlikely to act without broad committee support.
According to Barclays analysts McLean and Millar: "to respect the Fed's consensus-driven culture and await the communications task force review." A change is not expected before next year.
The trade-off Barclays flags
Fewer meetings could serve what the analysts call Warsh's goal of a Fed that casts a smaller shadow over markets, cutting the market's dependence on Fed signaling and pushing more reliance onto economic data and market prices. It would also reduce the workload tied to forecasts and communications.
Yet Barclays warns a leaner schedule could leave the committee less nimble in responding to evolving economic conditions and cut its opportunities to explain how it reads incoming data. Fewer meetings could also make each one more consequential, concentrating market focus on individual decisions.
Barclays frames the debate less as a question of the right number of meetings, and more as whether the FOMC shares Warsh's vision of a Federal Reserve that communicates less and intervenes less in markets.
Source: Investing.com
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