{"text":[[{"start":7.95,"text":"Kevin Warsh hailed a “new chapter” for the Federal Reserve at his first press conference at the helm on Wednesday as he vowed far-reaching reforms at the world’s most important central bank."}],[{"start":19.65,"text":"“The institution wants to figure out how we can do better,” he said."}],[{"start":23.349999999999998,"text":"He also surprised Wall Street with the intensity of commitment to fighting inflation — an indication that he could back higher interest rates despite being picked for the job by President Donald Trump who wants low borrowing costs. "}],[{"start":35.3,"text":"These are the biggest takeaways:"}],[{"start":37.599999999999994,"text":"Hawkish talk "}],[{"start":38.8,"text":"Trump selected Warsh on the hope that he would slash rates after the president berated his predecessor Jay Powell for keeping them too high. But the new chair struck a distinctly hawkish tone on Wednesday as he vowed to direct the apparatus of the central bank to tackle inflation."}],[{"start":55.849999999999994,"text":"“Persistently high prices are a burden for the American people,” he told the post-meeting press conference. “Members of the [Federal Open Market Committee] are unambiguous and unanimous: this committee will deliver price stability.”"}],[{"start":69.19999999999999,"text":"Markets read Warsh’s pledge to tackle inflation, combined with the signalling of nine of his colleagues that they anticipated at least one rate rise before the end of the year, as sharply hawkish. The two-year Treasury yield, which is sensitive to rate expectations, jumped to a 16-month high as investors priced in a rate rise in October."}],[{"start":90.39999999999999,"text":"“Warsh kept repeating the mantra: we have to deliver on price stability . . . we’re going to fix that,” said Brett Ryan at Deutsche Bank. “When you pair that with what the [summary of economic projections] was showing, the direction of travel seems to be towards a rate hike.”"}],[{"start":105.99999999999999,"text":"Communications overhaul"}],[{"start":107.99999999999999,"text":"Warsh wants a less-is-more approach to the Fed’s communications."}],[{"start":111.34999999999998,"text":"“Forward guidance isn’t the business we should be in,” he said as he joked that predictions were made using “pencils [with] big erasers”."}],[{"start":119.19999999999997,"text":"The FOMC on Wednesday had ditched any sign of what might come next for interest rates from its statement which, at about 130 words, was also far shorter than the one from Powell’s final meeting."}],[{"start":131.39999999999998,"text":"While Powell followed the communications approach set out by predecessors Ben Bernanke and Janet Yellen, Warsh is likely to return to the more opaque era of Alan Greenspan, whom he has long admired."}],[{"start":143.84999999999997,"text":"Warsh did not contribute his own projection for the Fed’s “dot plot” of rate forecasts — a Bernanke-era innovation. "}],[{"start":150.79999999999995,"text":"“We could be moving back to a time where it’s a little bit more like Greenspan and the ‘Is he carrying a briefcase or not?’ [question],” said Luke Tilley, former economic adviser at the Philadelphia Fed. "}],[{"start":163.94999999999996,"text":"Fed watchers half-jokingly reviewed the thickness of Greenspan’s briefcase to speculate on how rates would move during his term as chair from 1987 to 2006 (the St Louis Fed wrote a paper about it). "}],[{"start":177.14999999999995,"text":"Warsh heralded further changes, saying one of his five task forces would review “communications broadly, press conferences, dots, meetings and the like, transcripts, minutes”."}],[{"start":188.74999999999994,"text":"He also suggested the Fed might dial back its press conferences. “You want to make sure you have something important to say.”"}],[{"start":196.09999999999994,"text":"Balance sheet"}],[{"start":197.29999999999993,"text":"Warsh has long signalled a desire to shrink the Fed’s balance sheet, arguing the bond-buying sprees — under which it has bought trillions of dollars of US Treasuries — strayed into territory best left to Congress."}],[{"start":210.89999999999992,"text":"The new Fed chair will not impose his will in this area as quickly as he has revamped the way the central bank signals its intent to markets. "}],[{"start":219.0999999999999,"text":"In its statement on Wednesday, the FOMC “reaffirmed its policy of maintaining ample reserves in the banking system” — code that, for now, the balance sheet will remain around the $7tn mark to match lenders’ demand for the central bank’s cash."}],[{"start":234.0999999999999,"text":"But Warsh remains serious about reform, unveiling a task force to “review the benefits and risks of the current ample reserves regime and the composition of the Fed’s balance sheet”."}],[{"start":245.49999999999991,"text":"Crucially, the task force, which will also “assess alternative frameworks for the conduct and operation of monetary policy”, left open the option to drastically slim down the balance sheet to levels last seen before the 2008 global financial crisis when the Fed adopted a so-called scarce reserves regime."}],[{"start":264.8499999999999,"text":"Reverting to that era could provoke tensions with colleagues, however, including Fed governor Christopher Waller, who this year described a return to such a world as “inefficient” and “stupid”."}],[{"start":276.8499999999999,"text":"Many on the FOMC would support more moderate reforms such as adjusting liquidity regulations, which could slash up to $2tn off the balance sheet."}],[{"start":286.69999999999993,"text":"Economic data"}],[{"start":289.29999999999995,"text":"Warsh also wants the Fed to use different data to gauge the health of the US economy, arguing that many of the current sources provided “echoes of history” instead of real-time insights and were frequently subject to revisions."}],[{"start":302.19999999999993,"text":"“Most of the data that central bankers and other government officials in the United States consume come with old-fashioned survey methods,” Warsh said."}],[{"start":311.3499999999999,"text":"He criticised “survey methods that don’t have response rates that we need, asking questions that might have been quite applicable a generation ago that are less applicable now”."}],[{"start":320.8499999999999,"text":"Many statistical agencies globally, including the US’s Bureau of Labor Statistics, had response rates for polls that are often conducted by telephone plummet since the coronavirus pandemic. "}],[{"start":331.8999999999999,"text":"Warsh also prefers private sector data compilers. “Almost every private company CEO that’s running his or her business are doing so with real-time information that isn’t subject to much revision, that is telling them what just happened at that very moment.”"}],[{"start":346.8999999999999,"text":"Brett Matsumoto, the incoming commissioner of the BLS, which compiles the monthly employment and consumer price index reports, last week acknowledged there was an “end date to the survey-based” system the government relies on."}],[{"start":360.24999999999994,"text":"A new Fed task force on data will “evaluate new information sources and consider methodological changes to improve data gathering”."}],[{"start":368.69999999999993,"text":"Lack of clarity"}],[{"start":370.6499999999999,"text":"Despite the announcement of the new task forces and signals of other changes, much of how Warsh will approach the job remains unclear."}],[{"start":378.6499999999999,"text":"He said the task forces would mostly complete their reviews by the end of the year."}],[{"start":383.44999999999993,"text":"“While there was little concrete in the press conference about details of the changes a Warsh Fed will make, there was plenty of ambition,” said John Velis at BNY."}],[{"start":393.3499999999999,"text":"The shift in communications style will also make it more difficult for markets to read into the central bank’s plans. Economists said there could be increased market volatility around Fed decisions as a result."}],[{"start":405.44999999999993,"text":"Warsh was adamant this was a price worth paying. "}],[{"start":408.69999999999993,"text":"“Financial market prices are probably the most important source of information to guide central bankers,” he said. “But when all the financial markets are doing is reflecting back what we’ve said, then we’re taking the most important source of information and we’re being blind to it.”"}],[{"start":431.5499999999999,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1781767460_9936.mp3"}