Warsh’s Fed overhaul faces resistance as rate path stays hawkish

Federal Reserve Chair Kevin Warsh is moving quickly to change how the central bank communicates and makes policy decisions, but his broader efforts are progressing more slowly as inflation remains elevated and some officials resist faster reforms. According to the report, Warsh has already altered several visible parts of Fed operations, including shortening postmeeting press conferences and changing how reporters are seated. More significantly, he has shifted the Fed away from traditional forward guidance and toward a framework that puts greater weight on broad financial conditions such as asset prices, credit availability, Treasury yields, and the dollar. Markets are responding as if additional rate increases could still be coming if inflation does not ease. Traders have also priced in the possibility of more hikes in the months ahead, while the Fed’s planned balance sheet reduction appears likely to move more slowly as Warsh seeks consensus from other policymakers.