Fed’s Warsh taps broad group of Fed outsiders to oversee review

Federal Reserve Chairman Kevin Warsh tapped a broad and intellectually diverse group of economists and former central bankers to oversee the five task forces he is establishing to review the U.S. central bank's operations, covering technical issues like management of its balance sheet as well as forward-leaning ones like the impact of artificial intelligence.

Warsh announced the task forces at the press conference following his first policy meeting as Fed chief on June 16-17.

The central bank on Thursday named 15 people to lead those groups, which will use Fed staff to assist but "will operate independently, with a mandate to follow the evidence, provide candid feedback, and produce rigorous findings for the Federal Open Market Committee," the Fed said in a statement.

The group includes people from across the policy spectrum, with Harvard University economics professor Raj Chetty, a pioneer in the use of alternate and real-time data in analyzing how households and neighborhoods are faring, helping to lead a panel on data, famed tech investor Marc Andreessen among three co-leads of a panel on productivity and jobs, and Greg Mankiw, who was chair of the Council of Economic Advisers in the George W. Bush administration, co-leading a task force on inflation.

Former heads of the central banks of Brazil, England and India are among the appointees, as is Nobel economics prize winner Thomas Sargent, currently a professor of economics at New York University, who will join the panel on inflation.

"The U.S. economy has changed significantly over the last generation, and never more so than right now. Each task force will carefully consider whether policymakers' means and methods, analytical tools and policy approaches can be improved upon," Warsh said in a statement. "The goal is straightforward: to ensure the Fed is best positioned to achieve our objectives in this consequential time."

The Fed did not provide further detail on how the groups will proceed or the timing of their work, though Warsh at his first press conference said he hoped to be getting recommendations by the end of the year.

Warsh, a Fed governor from 2006 to 2011, had since leaving the central bank grown increasingly critical of its approach to monetary policy and its maintenance of a large balance sheet in the trillions of dollars. More recently, ahead of his nomination by President Donald Trump to lead the central bank, he had identified other areas he felt needed attention, particularly the use of cutting-edge, "real-time" data to put Fed decisions more in sync with the economy, and the possible influence of artificial intelligence on productivity and jobs.

Along with data, inflation, and productivity, two other task forces will look at Fed communications and the management of its balance sheet.

By turning the review of those five key areas over to outside experts - "the best minds from a range of disciplines" in Warsh's words - the process will contrast with recent Fed reviews that were driven more by internal analysis and discussion.

It is not clear, for example, what role the Fed's seven governors or 12 regional Reserve Bank presidents may play in the task force reviews.

But the announcement also recognizes that the work of the task forces is just a starting point for recommendations, the most consequential of which would likely need approval by Warsh's colleagues. In cases of truly fundamental change, the Fed has typically relied on broad if not unanimous consensus before moving forward.