Federal Reserve Chairman Kevin Warsh has tapped former Bank of England Governor Mervyn King to co-chair the US central bank’s new task force on communications. Warsh is making a shake-up of how the Fed communicates a key plank of his leadership, and has vowed to rethink how officials signal their outlook for monetary policy to both the public and investors. He also has not committed to holding a press conference after every Fed interest-rate decision, and in the past has encouraged policymakers to reduce the volume of speeches they give. Tapping King to co-chair the communications task force will offer a rare opportunity for an external review of how the Fed operates. King, who was Governor of the Bank of England from 2003 until 2013 and led the UK central bank through the 2008-09 financial crisis, confirmed through his office that he will be a co-chair of the communications task force but declined further comment. “Some would have been academics in the audience, but we really tried to find the best minds in the economics profession among practitioners.”
Task Forces
Warsh arrived at the Fed in May promising “regime change” and last month announced the creation of five task forces aimed at examining key areas with an eye toward proposing changes to the way the Fed operates. Read More: Warsh Wants Less Fed Talk, Risking More Market Surprises
The task forces will address communications, the balance sheet, the Fed’s “use and reliance on existing data sources,” productivity and jobs and the central bank’s “inflation frameworks.” The groups, which are expected to share their conclusions by year-end, will include outside experts supported by staff, Warsh said in June when announcing the task forces. “Sometimes we need a foreigner to sort of see things clearly, and the idea of these is not to prejudge the outcomes. When the newly elected Chancellor of the Exchequer, Gordon Brown, granted the BOE independence in setting interest rates in 1997, King honed the so-called Inflation Report — a quarterly assessment of the economic outlook, now renamed the Monetary Policy Report — as a means of guiding investors on policy. Among King’s most well-known observations on central bank communication was a speech in 2005 citing his “Maradona theory of interest rates.” He described a goal during the 1986 World Cup — where Argentinian soccer player Diego Maradona scored after running through his English opponents in almost a straight line — as an illustration of how central bankers achieve policy aims by persuading investors of their possible intentions.
Key Takeaways
- King, who was Governor of the Bank of England from 2003 until 2013 and led the UK central bank through the 2008-09 financial crisis, confirmed through his office that he will be a co-chair of the communications task force but declined further comment.
- Warsh said on Wednesday that the announcement of the task forces’ outside experts will likely come next week and will include experts from both outside the central bank and the US.
- “Some of them would have been folks in seats like this in prior years,” Warsh said during a panel at the European Central Bank’s annual Forum on Central Banking in Sintra, Portugal.
- “Some would have been academics in the audience, but we really tried to find the best minds in the economics profession among practitioners.” Task Forces Warsh arrived at the Fed in May promising “regime change” and last month announced the creation of five task forces aimed at examining key areas with an eye toward proposing changes to the way the Fed operates.
- Read More: Warsh Wants Less Fed Talk, Risking More Market Surprises The task forces will address communications, the balance sheet, the Fed’s “use and reliance on existing data sources,” productivity and jobs and the central bank’s “inflation frameworks.” The groups, which are expected to share their conclusions by year-end, will include outside experts supported by staff, Warsh said in June when announcing the task forces.
Insights & Analysis
- King, who was Governor of the Bank of England from 2003 until 2013 and led the UK central bank through the 2008-09 financial crisis, confirmed through his office that he will be a co-chair of the communications task force but declined further comment.
- “Some would have been academics in the audience, but we really tried to find the best minds in the economics profession among practitioners.” Task Forces Warsh arrived at the Fed in May promising “regime change” and last month announced the creation of five task forces aimed at examining key areas with an eye toward proposing changes to the way the Fed operates.
- The new Fed chief has been critical of forward guidance, a policy tool where officials offer signals on the path of interest rates, and last month declined to submit a forecast as part of policymakers’ quarterly rate projections known as the “dot plot.” “There will still be dots for a short time, at the very least, but we have a task force for that,” Warsh said Wednesday.