Warsh considers reducing frequency of Fed policy meetings

Federal Reserve Chair Kevin Warsh is considering reducing the number of regularly scheduled meetings at which the Fed sets interest rates, a potentially seismic move that would mark the most significant change in how the central bank operates in years.

The Federal Reserve's 12-person policy committee meets eight times a year and votes on whether to lift, lower or hold borrowing costs. Warsh raised the idea of changing the frequency of those meetings at the Fed's gathering this week, according to four people with knowledge of the discussion who were not authorized the speak publicly.

Warsh, who was presiding over his second meeting as chair, left the impression that a revised schedule could be decided on before the next meeting in mid-September, even if the changes would not be carried out until later.

The Fed declined to comment.

Reducing the cadence of the meetings - and, in turn, votes on rates - would be by far the most consequential change of Warsh's tenure so far. It would mark a break from decades of precedent, reshaping the way the Fed steers the economy and potentially making it less responsive to changes in inflation and the labor market.

Meeting less often would also reduce the information available to Wall Street and the broader public about the Fed's thinking about the path for interest rates, reversing a decades-long trend toward greater openness.

That would fit a larger pattern that has emerged early in Warsh's tenure. He has dramatically shortened the policy statements that the Fed releases after each meeting and has provided far less detail about how he views the economy and the appropriate direction for rates. He has also raised the idea of scaling back the post-meeting news conferences that have been the Fed's practice since January 2019.

Since Warsh took over as chair in May, he has sought to portray himself to the public and within the Fed as someone who would bring about significant reform to an institution he has long criticized. The central premise of his campaign for the job was to enact "regime change." So far, that has materialized as five task forces focused on a range of issues, from how the Fed communicates to the public to the data sources it prioritizes.

At the meeting this week, Warsh spoke about the legal authorities the Fed must abide by regarding the minimum number of meetings it needs to hold in a year and the timeline for such a change, the people said. Warsh, the people said, asked officials to reach out to him with their thoughts instead of having a full discussion of the meeting calendar at this week's gathering.

The Fed has already announced meeting dates for the rest of this year and for 2027, although a note on the central bank's website says, "Each meeting date is tentative until confirmed at the meeting immediately preceding it."

The law that established the Fed in its modern form - the Banking Act of 1935 - requires the central bank's policymaking Federal Open Market Committee to meet "at least four times each year." The chair has the power to call meetings, as do any three members of the committee.

The Fed can hold emergency meetings to react to unexpected developments. In the past, the Fed has only relied on inter-meeting policy adjustments during periods of crisis, such as the pandemic.

At his confirmation hearing in April, Warsh said in response to a question from Sen. Ruben Gallego, D-Ariz., that four meetings were "not enough" and that "having more meetings than that is appropriate."

Until the early 1980s, the Fed met frequently, nearly every month in many years, and occasionally even more often. In 1956 alone, Fed officials met 19 times. In 1978, at the height of that decade's inflation crisis, the committee held 12 full meetings and several more emergency conference calls.

The Fed adopted its current schedule of eight meetings a year - roughly one every six weeks - in 1981, when Paul Volcker was chair. It has held to that schedule ever since, although the committee has held emergency meetings, in person or by phone, during periods of crisis.

The consistent schedule has established a predictable rhythm for Fed officials and staff members, and for the investors and forecasters who follow the central bank's decisions. The Fed staff prepares briefing materials and forecasts, known as the "Tealbook," before every meeting. Minutes are released three weeks after each meeting; full transcripts, along with briefing materials, are released on a five-year lag.

The Fed has discussed changing the meeting calendar in the past. In a 1988 memo, two senior Fed staff members - including Donald Kohn, who later served as vice chair - weighed the pros and cons of more frequent meetings, including the "advantage of more timely opportunity to review new information" but also "the inconvenience of more preparation and travel." Ultimately, they concluded that the eight-meeting schedule "might still be considered adequate."

This article originally appeared in The New York Times.