Fed's first Warsh era minutes are about to go public
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Federal Reserve chairman Kevin Warsh at the June news conference. Photo: Al Drago/Getty Images
The minutes of the Federal Reserve policy meeting three weeks ago, due out Wednesday afternoon, are shaping up to be the most attention-worthy in recent memory.
Why it matters: Policy appears to be on edge, with Fed officials deeply divided over whether an interest rate increase is in order. Chairman Kevin Warsh has declined to signal his own instincts and has backed away from the practice of sending explicit guidance about future policy moves.
- He has also pursued more profound changes in the Fed's communication style that may or may not be reflected in the formal meeting minutes.
State of play: The policy-setting Federal Open Market Committee left interest rates unchanged at that June meeting, but in projections released alongside the decision, nine of 19 top officials believed at least one rate increase this year is likely to be appropriate.
- Nine other officials anticipated leaving rates unchanged or cutting them.
- That leaves one official who didn't submit a projection: Warsh, whose vote is the most important.
- In his post-meeting news conference (and a subsequent public appearance last week), he didn't tip his hand on whether he sees a need for a rate hike.
Zoom out: Warsh also shortened and simplified the post-meeting policy statement, kept his press conference shorter than in the past and announced a task force that will evaluate bigger changes to Fed communication.
- It is worth watching whether that brevity and restraint are also evident in the minutes, which are generated by a careful process in which Fed staff parse questions like whether "many," "some" or "several" officials made a particular argument.
- The last meeting's version was 18 pages long, encompassing nearly 7,000 words. Might the Warsh Fed seek a more streamlined version that omits some degree of detail?
Of note: The minutes are drafted by staff but must be committee-approved by what is usually a unanimous notation vote. It's worth watching whether that changes in the event of an overhaul.
- "We don't expect material format changes" in this minutes release, JPMorgan chief U.S. economist Michael Feroli said in a note, "but the risks clearly tilt toward less transparency in Fed communications."
The bottom line: Warsh describes FOMC meetings as a "family fight" in which he wants vigorous but respectful debate.
- These minutes will offer both the clearest window yet into what occurred at last month's family fight and signs of how much will be disclosed about their contents in the future.
