Warsh Considers Dramatic Cut in Fed Interest Rate Meetings

Federal Reserve Chair Kevin Warsh is considering reducing the number of meetings where the central bank sets interest rates. This proposal would be a significant change in how the Fed has operated for decades, with the current eight-meeting schedule dating back to 1981.

Warsh raised the idea during last week's Federal Open Market Committee meeting, asking whether there would be benefits to meeting less frequently. The idea follows his broader push to reshape how the central bank conducts itself, including reducing its policy guidance and encouraging markets to make decisions based on economic data rather than Fed signals.

While some economists argue that fewer meetings would encourage policymakers to focus more on economic data between meetings, others are concerned that it could lead to increased volatility in financial markets. 'If anything, the volatility around Fed meetings has diminished greatly because of the increased transparency,' said Russell Rhoads, a clinical associate professor at Indiana University's Kelley School of Business.

Warsh has also floated reducing the number of press conferences he holds after policy decisions, although he has committed to holding them after the remaining three meetings this year in September, October, and December. The potential challenge to his more subdued approach is that markets may not know how the Fed will react in times of economic crisis or downturn.