Warsh Considers Cutting Rate-Setting Meetings to Reduce Market Dependence

Federal Reserve Chair Kevin Warsh is exploring ways to reduce market dependence on central bank signals. He suggested cutting down the number of meetings where interest rates are set, potentially from eight times a year to fewer.

Warsh has been pushing for less frequent rate-setting meetings since his confirmation hearing in May. During that time, he noted that four meetings per year was not enough but acknowledged that more than eight meetings were necessary.

The proposal comes after five consecutive years of elevated inflation and scrutiny on the central bank. Some economists argue that reducing the number of meetings would encourage policymakers to focus on economic data between gatherings and reduce market volatility.

Russell Rhoads, a clinical associate professor at Indiana University's Kelley School of Business, believes that less frequent meetings may lead to more attention being paid to each gathering, making markets' anticipation even greater. He also noted that the Fed's increased transparency has diminished volatility around meetings and that cutting the number of meetings is 'going in the wrong direction'.