US Rates: Fed Policy Outlook & New Task Forces

**SPEAKER_1** (0:01)
Welcome to JP. Morgan's At Any Rate podcast series. In this episode, we will be discussing Fed policy and the potential implications from the Fed working groups.
Now for your host and head of content strategy here at JPMorgan, Samantha Azzarello.

**Samantha Azzarello** (0:18)
Welcome everyone to our call on Fed policy and the task forces. The Fed has been top of mind for investors, there's been a lot of focus on it, so we thought it would make sense to have Jay Barry, the global head of rate strategy, and Mike Feroli, our chief US economist, come and have a call on a piece they just put out last week, a joint piece on the task forces and going in depth on that. So we're going to have a little bit of a structured conversation. I'm sure they will go off the cuff and then we will answer. They will, I know. And then we'll have client Q&A.
And with that, let's get into it. So great piece that came out last week. Mike, overall, zoom out for us. What do the task forces mean?

**Michael Feroli** (0:57)
Okay, so I think the first thing to emphasize is these are the chairs' task forces, right? Fed Chair Warsh's task force. Second thing is, last year, the Fed just underwent one of their about every five year framework reviews. And that was a committee-wide effort, right? And so it wasn't just the chair, it wasn't just the board. It was the board and the 12 regional reserve banks all involved in the analysis. So how do we interpret this? I think it's, you know, Worf wasn't around for that framework review, but this is the way that he can, you know, kind of put a little bit of a stamp on the framework. Now, it might not be as ambitious as a framework review, right? We're not, you know, when you had the first framework review, you shifted from inflation targeting to flexible average inflation targeting, and then you shifted back. So this isn't that ambitious in terms of, or potentially not that ambitious, balance sheet, maybe.
But I do think, you know, this is his way of saying, hey, I wasn't there for the framework review. Can I have a little bit of say on the framework? You know, how the broad structure of defense operating environment is thought about. And then finally, I guess the big question is, in my mind is, you know, how much does the committee, you know, buy into this, right? So for something to be implemented, it has to be either voted on by the board or by the committee depending on what we're talking about. And if you really want to get into legalities of that, we talked with Scott Alvarez last week, the former general counsel of the Fed.
But basically, the big story here is that the committee, you know, this task force has come to conclusions, but the committee is going to have to buy into it. And it's going to be interesting to see how that plays out. I thought it was interesting that just last week, Governor Barr gave a speech on AI and what that meant for the labor market. Did not mention the task forces at all, right? And one of the task forces is AI and the labor market. So I think, you know, that may be a sign that the rest of the committee is going to need some convincing before they just go along with whatever these task forces decide on.

**Samantha Azzarello** (3:07)
The framework review that was done last year, how frequently would that have happened if we weren't going off with this one?

**Michael Feroli** (3:13)
Yeah. So the first one was 2019
And at that time, they said they would do it periodically. And they said roughly every five years, it was 60 years. You know, the pandemic may have slowed things down. And that's generally what they've communicated, is that something like that would be the schedule for kind of doing a sick to nuts review of how they, how they look at things. I guess maybe another thing I'd add is that you know, so I think a lot of focus has been, and we're going to talk more about the individuals who are staffing these various task forces, which were chosen by the chair and his people.
You know, and I think there's a thought here that a lot of the people on the task forces have publicly aligned with some of the force's stated preferences, right? So in some ways, it's like, you know, to take a rabbit out of the hat, you got to put a rabbit in a hat. And I think that's what we saw taking place, you know, a few weeks ago.