By Megan Leonhardt
A key feature of Jerome Powell's Federal Reserve leadership was a robust communications strategy. Kevin Warsh, confirmed last week as the next Fed Chair, has promised a different approach. It could lead to more investor uncertainty and market volatility.
Powell presided over lengthy press conferences after every Federal Open Market Committee meeting, provided more than a dozen congressional testimonies, and gave more than 160 speeches and statements during his eight-year tenure. He also met with Congress more often than his predecessors, according to research from Thomas Drechsel, an economic professor at the University of Maryland.
In addition, the FOMC released statements on its policy decisions under his leadership, while committee members, including Fed governors and regional Fed presidents, produced a quarterly summary of their economic projections (SEP) and gave more than 1,000 speeches and interviews in this time. The Powell Fed, in short, offered an unprecedented level of what academics refer to as forward guidance, or indications of any sort that telegraph the likely path of short-term interest rates.
As a result of this communications onslaught, markets faced few surprises around interest-rate decisions, which helped reduce volatility, even in turbulent economic periods. Academic research largely shows that forward guidance from central banks typically lowers the volatility of near-term interest rate expectations and stabilizes both equity and bond markets, although some recent research has found that forward guidance has grown less effective.
Financial markets need such guidance, or "hand-holding," says Torsten Sløk, chief economist at Apollo Global Management. "If you have some forward guidance -- even if that turns out to be not exactly what will happen -- it does lower volatility," Slok says.
Not everyone agrees on the benefits of "Fedspeak," a phrase popularized during former Fed Chair Alan Greenspan' s term. "I don't think the forward guidance needs to be that explicit," Rick Rieder, chief investment officer of global fixed income at BlackRock, recently told Barron's. "I don't think that's a bad thing for the bond market to have a bit more volatility."
In the latest annual survey of academic and private-sector Fed watchers conducted by the Brookings Institution, about a third of respondents agreed that Fed governors and the 12 regional Fed bank presidents should give fewer public speeches. Just over half of respondents found the so-called dot plot, or individual policymakers' forecasts for future interest rates, a feature of the quarterly SEP, useful, with those in the private sector finding it more helpful than academics. But only 19% said the Fed should scrap the dot plot, according to the survey, released earlier this month.
Overall, the central bank received an average grade of a B-plus for its communications in 2025, according to Brookings.
Perhaps more important, stock market volatility remained low during Powell's term, as measured by the Cboe Options Exchange's Cboe Volatility Index. It averaged a reading of 19.53 across the 66 FOMC decision days under Powell, according to Dow Jones Market Data. That compares to average readings of 21.51 under former Fed Chair Ben Bernanke and 14.27 under former Chair Janet Yellen, who didn't weather any major economic downturns during her term.
Warsh, a former Fed governor and private investor, has said he plans to reform the Fed's communications approach, which could include changes to the publication of the dot plot, the number of speeches Fed officials give, and the post-FOMC-meeting press conference. "What the Fed needs is a reform to its frameworks and a reform to its communications," Warsh said during his confirmation hearing in front of the Senate last month. "I've seen what the Fed's done well, and often I'll give them one cheer or two, but now more than ever, the Federal Reserve needs three cheers, and that's what I hope to deliver."
Warsh refused to confirm that he would hold a press conference after every FOMC meeting, as Powell has done. "If you ask me my true personal opinion, right now, Fed chairs and other central bankers around the FOMC, they speak quite frequently. There is no lack of transparency. But I would say this, I think truth seeking is more important than repetition, " he told the Senate.
No one is expecting Warsh to implement sweeping changes overnight. It likely will take a few FOMC meetings to notice any new procedures in play, Slok says. Powell attempted to change the Fed's communications approach, seeking to revise the dot plot, but acknowledged at the Fed's April press conference that such change can be a "very complex" issue.
In attempting to make changes, Powell said, Fed officials quickly found that "we couldn't come up with anything that had really broad support on the committee, and so we just moved on."
Warsh may encounter the same challenge.
Write to Megan Leonhardt at megan.leonhardt@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 17, 2026 01:00 ET (05:00 GMT)
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