Fed's Opaque Communication Style Sparks Market Concerns

Mark Zandi, chief economist at Moody's Analytics, is warning that the Federal Reserve's new communication style under Chairman Kevin Warsh is a growing risk to markets and the economy. The Fed's resistance to providing guidance on policy has raised concerns about volatility in markets.

Zandi notes that the lack of forward guidance from the Fed is a problem, as it makes it difficult for investors to price in future moves. He warns that if this trend continues, it could lead to a 'serious mistake' and trigger a market sell-off.

This shift away from providing clear guidance on policy has been notable since Warsh took over as Chairman. Unlike his predecessors, such as Alan Greenspan, who was known for his vague communication style, Warsh seems to be leaning towards even less information for investors.

Zandi's concerns are not just about the lack of market signals, but also about the potential for 'live' meetings, where investors will be unsure of what the committee will decide. This uncertainty could lead to increased volatility in bond and stock markets, as investors try to react on the day of a decision rather than pricing it in ahead of time.