Warsh Refuses to Provide Interest Rate Guidance, Fed's New Direction in the Spotlight
Federal Reserve Chairman Kevin Warsh reiterated that he will not provide forward guidance on the direction of interest rate policy. This statement marks a major shift in the US central bank's communication style.
At the European Central Bank's annual Central Banking Forum in Sintra, Portugal, Warsh stated that the Fed will determine the new direction. He also said that the next policy meeting on July 28-29 will be an important discussion space for Fed officials in determining their next steps.
Previously, in his first press conference last month, Warsh stated that Fed policymakers agreed that forward guidance was no longer appropriate for the current policy environment. He emphasized that the Fed would not provide any premature signals as the decision would be revisited in the near future.
Although the Fed kept interest rates steady last month, support for a potential rate hike this year is growing. The latest projections show that half of the 18 Fed officials expect a rate hike this year, although Warsh declined to provide his own projection.
At its last meeting, the Federal Open Market Committee (FOMC) unanimously maintained the federal funds rate in the range of 3.5% to 3.75%. Investors now expect at least one 25 basis point rate hike before the end of the year.
Warsh has also announced the formation of five task forces to review various aspects of the Fed's policy. One will focus on central bank communications, while others will address the balance sheet, data use, productivity and employment, and the inflation framework. (gn)*
Source: Newsmaker.id
