New Federal Reserve Chair Kevin Warsh implemented notable changes at his first policy meeting, and the minutes from that meeting may receive the same streamlined treatment.
The Fed is set to release the minutes of the Federal Open Market Committee’s June 17-18 meeting. Investors will be looking for more insight into how Warsh’s changes came to be and how policymakers weighed the economic risks when they met last month.
But Warsh introduced a much shorter and simplified policy statement, clocking in at just over 130 words—notably shorter than the releases during Jerome Powell’s tenure as chair. The latest minutes may follow suit.
That could make them less informative for investors, particularly when it comes to understanding details of policymakers’ views of the economy and current conditions, writes Steve Englander, head of North America macro strategy at Standard Chartered Bank. Englander expects the minutes to include fewer references to the degree of support among FOMC participants for differing views, risks and policy options.
“The minutes will become a more anodyne listing of policy decisions, such as when Paul Volcker was chair,” Englander noted. “Warsh explicitly avoided policy guidance in the statement and press conference, so it seems unlikely that he would permit such guidance via the minutes.”
Fed officials left the benchmark fed funds rate unchanged at 3.5%-3.75% at the conclusion of the two-day meeting. But the tone coming out of the meeting was decidedly hawkish. Nine of the policymakers who participated in the summary of economic projections—Warsh declined to provide his outlook—penciled in at least one rate hike by the end of the year.
The updated June policy statement, albeit shorter, also removed the previous forward guidance suggesting the next move would be a rate cut. Warsh highlighted the absence of forward guidance during the press conference, saying that providing signals “isn’t the business we should be in.” Still, Warsh pledged the Fed would deliver price stability, reinforcing expectations that the central bank may have to tighten policy in the coming months.
Typically, the minutes contain a paragraph that often begins: “With regard to the outlook for monetary policy…” Warsh, however, may have instead encouraged policymakers to keep the discussion focused on the current meeting, writes Jonathan Pingle, chief U.S. economist at UBS. That means the minutes may not provide much additional insight into how policymakers viewed the outlook for the months ahead.
Further, Warsh has characterized the meeting as a good “family fight” when discussing the vigorous policy debates held by officials. But Englander said that characterization may also reflect the secrecy that is often associated with family fights.
It is also possible that Warsh could shrink or eliminate the staff economic outlook section of Wednesday’s minutes, Englander added. He expects the minutes to emphasize the policy decision, as well as the Fed’s strong commitment to its 2% inflation target.
It’s worth noting that the meeting occurred just days after the U.S. and Iran signed a memorandum of understanding. Gas prices have plunged since then, limiting the risk of continued price surges. “Inflation risks have come down,” Warsh said during his appearance at the European Central Bank’s conference last week.
If the minutes do shed some light on how policymakers were considering the balance of risks at that point, Goldman Sachs economists expect that officials remained in wait-and-see mode.
“We suspect that FOMC participants treated the news about a deal with Iran and the reopening of the Strait of Hormuz—which emerged only a few days before the meeting—cautiously,” the firm’s economic team noted.
Markets are already pricing in a rate hike this year, so there’s limited room for Wednesday’s minutes to deliver a “further hawkish surprise,” writes Citi economist Andrew Hollenhorst.
