The Warsh Fed Will Look Nothing Like Before | Joseph Wang

**Joseph Wang** (0:00)
Again, I expected Kevin Warsh to be the Kevin begging for the job. He came out and he was like, Kevin, you always knew it was there.
So I think it was a pretty hawkish. I think that the market reaction is in line with the hawkish Fed. He has been a champion of having less Fed communication, and he put that into practice right away. Maybe we don't need an SEP. Maybe we shouldn't even have Fed presidents talk so much. Maybe we don't even need that many press conferences unless I had something to say. All the task forces are laying the groundwork for huge changes that are coming out to the Fed. You could actually have a significant consolidation of power within the Fed chair. What really stood out to me is this last sentence, that word Kevin says, the committee will deliver price ability. What you usually see in major tops is rate hikes. Now we didn't hike rates now, but market is pricing at a hike. So you got all these things coming up together.
I think they'll point to me to a...

**Felix** (0:53)
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All right, everybody, welcome back to another episode of Forward Guidance, and we are recording on a very special day today, June 17th, right after the first FOMC meeting from the new chair, Kevin Warsh. No one I'd rather be with right now than Joseph Wang, Fed Guy. Joseph, you're the man of the hour for this type of stuff. Great to have you on the show.

**Joseph Wang** (1:44)
Thanks for inviting me, man. It's great to be back.

**Felix** (1:47)
Yeah, great to be back.
We gotta talk about how many times people said they hate the name of this podcast now, or at least Kevin Warsh did. I see so many jokes about Forward Guidance is over.

**Joseph Wang** (2:00)
Going to change your name now?

**Felix** (2:01)
I know. We got to read for Anders. You got to maybe change it to Task Force, might be the new name for the podcast. How many times he said it?
We knew that was going to happen. He's been a big critic of Forward Guidance. We're going to spend the next little bit here talking all about the different points that we just learned from this pretty monumental day of a new Fed Chair. Why don't we start with that? Obviously, we got the statement that came out at 2 p.m. They took an ax to it. Much more concise statement, very little Forward Guidance, quite intentionally so. I just want to start off with hearing a bit about your take on the statement and then we'll get into some of the other specifics from the SEP and the press conference after.

**Joseph Wang** (2:43)
His statement was surprisingly brief, like you mentioned. Historically speaking, Kevin has always had disagreement with how the Fed communicates.
The Fed communication has changed a lot over the past few decades. A few decades ago, under Chairman Greenspan, there was basically very little communication and sometimes, the chair would hike or we would cut and no one would know about it. You'd actually have to go and look at the money markets, see if the Fed did anything. But since then, under Chair Bernanke, there's been a huge revolution in communications. Chair Bernanke was a big believer in transparency.
Under his leadership, there was something called the Dot Plot. FOMC members would guide to where they thought would be best for, or rates or employment inflation would be the next few years. He also began to do news conferences when he would take questions. These are all things that are relative to you, happened in the past 10, 15 years. Kevin was always a critic of this. He felt like having all this communication, especially with all the Fed presidents out there talking, that would confuse people. So he has been a champion of having less Fed communication, and he put that into practice right away. So if you compare this current Fed statement with the last one, you'll notice that it is much, much briefer, and I think is also shockingly hawkish. Now, when I'm looking at the recent statement, what really stood out to me is this last sentence that where Kevin says, the committee will deliver price stability, period. So that's kind of like a my truck moment for me, and it reminded me a lot of Chair Powell's Jackson Hole speech a few years ago, when inflation was raging high, Chair Powell went on stage with a very brief statement, said something to the extent that there would be some pain, tightening is coming, and then he sat back down. So I got the sense that Kevin is aiming with a similar effect, trying to tell everyone that the Fed is going to, I think, be more determined to get inflation down. So both a change in the tone in the statement, and also a change in the format. Like you mentioned, it's a lot more terse.