FX.co ★ Fed’s Warsh weighs reducing frequency of rate-setting meetings

Federal Reserve Chair Kevin Warsh is considering reducing the number of regularly scheduled meetings at which the regulator sets interest rates. According to The New York Times, the revised meeting schedule could be approved by mid-September, although the changes will take effect later. This move would mark the most significant operational change in the US central bank's history in decades, as the rule to hold eight meetings per year has remained unchanged since 1981.

This initiative aligns with Warsh's overall strategy to reform the Fed’s communication approach. He has previously scaled back the amount of information and guidance published after meetings, urging investors to focus on market data rather than the central bank's forecasts. During congressional hearings prior to his appointment, Warsh noted that meeting just four times a year, the legislative minimum established in 1935, would be "insufficient."

The discussion of this reform comes amid heightened economic uncertainty. At the last Fed meeting, the committee decided to keep the key interest rate unchanged at 3.5% to 3.75% per annum (with three dissenting votes), despite calls from President Donald Trump for a reduction. Meanwhile, US economic growth slowed to 1.5% year-on-year in the second quarter, down from 2.1% in the first quarter, while ongoing energy price volatility limits options for easing monetary policy.