FT Says Fed Chair Warsh to Keep Brief Messaging Strategy, Open to September Rate Hike

Federal Reserve Chair Kevin Warsh plans to stick with his strategy of keeping communications brief despite the recent market backlash, the Financial Times reported.

Citing people close to Warsh, the FT said he has acknowledged some mistakes in his early public communications after taking office. Even so, he has not changed course on his push to revamp how the Fed communicates. The newspaper said the core of Warsh’s strategy is to sharply reduce the amount of forward guidance policymakers give markets, and that he has reiterated that plan since the last Federal Open Market Committee meeting.

Markets have criticized the Fed for failing to provide enough guidance at its last FOMC meeting on how it would respond to inflation pressures sparked by the Iran war and higher energy prices. The 30-year Treasury yield recently climbed to its highest level since 2007.

Inflation expectations, however, have remained relatively stable. The FT said the inflation swap market monitored by the Fed is pricing in average inflation of 2.4% over the next five years.

The newspaper also reported, citing people close to Warsh, that he is prepared to back a rate increase at the September FOMC meeting if inflation data due in the coming weeks comes in above expectations and market rate forecasts move higher. As of Wednesday, CME FedWatch showed a 56.7% chance of a rate hike next month.