News Summary

• US Federal Reserve chair Kevin Warsh seemingly wants to outsource monetary policy to financial markets.
• In his telling, the central bank’s job is to referee and not influence market expectations.
• He argues that not only is it essential that the Fed provide no forward guidance about the future path of interest rates, but also that it not explain how it would likely respond as circumstances change.
• This is a recipe for confusion, greater volatility and higher risk premia.
• Warsh missed a chance to rebuild Fed credibility by not tightening US monetary policy.