Federal Reserve: Communication reset at Jackson Hole – TD Securities

TD Securities’ Oscar Munoz argues that Chair Kevin Warsh’s communication strategy has undermined market confidence in the Federal Reserve’s inflation-fighting resolve. The report expects Warsh to reset his approach as early as the Jackson Hole Symposium, with greater clarity on the Fed’s reaction function and policy framework seen as necessary to restore credibility and centralize guidance.

Warsh seeks to rebuild Fed credibility

"Questions around Fed credibility arose after the most recent FOMC meeting, with Chair Warsh's lack of clarity about how the Committee intended to lower inflation acting as a key catalyst. We expect a reset on strategy by the chairman as early as the Jackson Hole symposium."

"The Jackson Hole Symposium later this month seems like the perfect platform for Chair Warsh to set the record straight. While forward guidance may be out the window, providing information about the Fed's reaction function should not be."

"In the end, the Fed chair does not want to lose the power of the bully pulpit or for the market to outsource policy guidance from other Fed officials. The Fed chair should want to remain a relevant part of monetary policy considerations. This is why we think the current communications strategy from Chair Warsh needs a reboot."

"Absent clarity from the Chair, the market will likely look elsewhere to find information about the Fed's policy framework, including increasingly relying on guidance from more vocal Fed officials. As we have noted before, a number of Committee members appear to be more than happy to fill the void left by the Fed chair."