By Megan Leonhardt
Kevin Warsh kicked off his second stint at the Federal Reserve with a bang. Wednesday's post-policy-meeting press conference with Warsh, the central bank's new chairman, was exciting, surprising, shorter than usual, and at times concerning, especially for investors. As President Donald Trump would say, it made for good television.
Warsh's commentary -- or lack thereof regarding current economic conditions and the Fed's policy tilt -- also made for something else: It was a wake-up call for financial markets, signaling that the Fed no longer would spoon-feed investors information on which they had come to depend. That may sound disruptive, and it may lead to more market volatility, at least in the short term. But it is likely to prove a good thing for both the markets and the Fed.
Importantly, Warsh said, financial markets "perform best when they react to incoming data," not when they try to game how the Fed will react to that data. "Financial market prices are probably the most important source of information to guide central bankers," he said. "But when all the financial markets are doing is reflecting back what we've said, then we're taking the most important source of information and we're being blind to it. I'd like us to create a system where those blinders come off."
Warsh hinted at a blizzard of changes ahead, but the biggest arguably may be dispensing with consideration of the markets' reaction to the Fed's words. That marks a sharp departure from his predecessor, Jerome Powell, who gave investors more deference, and certainly more signals about the future direction of monetary policy.
What does the change mean in practical terms? For one, investors and businesses may need to find and build new data sources to understand current economic conditions. Warsh strongly hinted the Fed would do the same, rather than rely primarily on incomplete or outdated government data collected through antiquated methods.
If the Warsh Fed is short on guidance, it is long on task forces that will study nearly every aspect of the institution, including data sources. Warsh announced a "task-force palooza" on Wednesday, in the words of Tom Essaye, founder and president of the Sevens Report. He is forming five task forces to focus on Fed communications, the balance sheet, economic-data usage, productivity and jobs, and the Fed's inflation frameworks, and said he expects their work to be wrapped up around year end.
It is a savvy move and coalition-building exercise that likely will quash accusations Warsh is ripping apart the very fabric of the Fed. Still, the task forces are likely to recommend "substantial changes," Essaye wrote.
Warsh was demonstrably clear about one thing, in both the postmeeting statement and his press conference. The Fed is committed to bringing inflation back down to its 2% target, which it hasn't hit in the past five years. Annual inflation is now closer to 4%, owing in part to a rise in energy prices that followed the start of the Iran war.
A firm commitment to trimming inflation can only be read as good news for the economy and consumers. "Persistently high prices are a burden for the American people, but the recent past need not be prologue," Warsh said. "I am pleased to report that members of the FOMC [Federal Open Market Committee] are unambiguous and unanimous: This committee will deliver price stability."
Members of the wider policy committee signaled they aren't afraid to raise interest rates to achieve that goal, penciling in at least one quarter-percentage-point hike by the end of 2026.
Markets fell Wednesday, with the S&P 500 index shedding 1.2% on fears that rates will rise. Thursday, however, the index regained more than 1%.
"What we've given markets is a new chapter for the central bank, some fresh thinking," Warsh told the press.
Like his press conference, that is bound to be exciting.
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
June 18, 2026 14:26 ET (18:26 GMT)
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