Warsh: The Fed is embarking on a new course and will not provide forward guidance.
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Analysts: Don't expect Walsh to provide forward guidance tonight.
Odaily Odaily reports that tonight, investors will hear from Federal Reserve Chairman Warsh again, marking his first public speech since his debut at the Fed's policy meeting two weeks ago. However, investors shouldn't expect him to actually provide forward guidance on future monetary policy, as Warsh has made it clear he wants to reduce the use of forward guidance, believing it doesn't help the Fed in practice. He might, however, offer some insights on how to assess inflation and the economy. Krishna Guha, head of strategy and economics at Evercore ISI, said, "We will be watching how he articulates the inflation outlook and its drivers, including lower oil prices, easing inflation expectations, other commodities, a stronger dollar, and the cost spillover effects of artificial intelligence." (Jinshi)
"The Fed's mouthpiece": Trump sets the tone, ushering in a new era of "forward guidance" for the Fed.
Odaily Odaily reports that Nick Timiraos, often referred to as the "Federal Reserve mouthpiece," posted on the X platform that Trump stated he considers Fed Chairman Warsh to be a dovish figure within the Federal Open Market Committee (FOMC). This comes a day after White House National Economic Council Director Hassett made similar remarks; and a week earlier, Treasury Secretary Bessant stated he hoped the Fed would remain "open" to inflation and anticipated policy easing this year. A new era of "forward guidance"...
Federal Reserve Governor Waller: If necessary, the use of forward guidance can be abandoned to maintain policy flexibility.
PANews reported on July 6 that Federal Reserve Governor Waller stated at a conference on monetary policy transmission in Rome, Italy, that monetary policy decisions must be based on the current "initial conditions" of the economy and cannot mechanically apply historical averages. He pointed out that large-scale shocks can trigger non-linear behavioral changes, thereby altering the time lag of monetary policy and the slope of the Phillips curve. Waller emphasized that forward guidance can influence the market in advance and accelerate policy transmission under certain conditions, but if the wording is too rigid or faces multiple possible scenarios, it will limit FOMC operations such as interest rate hikes and delay the timing of adjustments. The Federal Reserve has established a working group to assess the role of forward guidance, and he believes that in some situations, the use of this tool should be weakened or even stopped, and decisions should rely more on real-time economic data.
Federal Reserve Bank of Walter offered two key considerations for monetary policy: initial conditions and forward guidance determine the transmission effect.
According to Odaily Odaily, Federal Reserve Bank of Walter Waller offered two points of consideration regarding the monetary policy transmission mechanism, emphasizing that policy effectiveness depends on initial conditions and the way forward guidance is used: First, "initial conditions are crucial," meaning monetary policy assessments should be based on current economic conditions, not historical averages. Second, regarding the role of forward guidance, he believes that while forward guidance can accelerate policy transmission in certain situations by influencing market expectations and changing financial conditions in advance, if it is too rigid or lacks flexibility, it may weaken policy effectiveness or even delay necessary policy adjustments. Waller emphasized that when multiple economic scenarios exist, the “average path” cannot be simply used as a basis for policy guidance, and policymaking needs to maintain adaptability and flexibility to different scenarios.
Warsh: Don't expect to get hints from the Fed about the future direction of interest rates.
PANews reported on July 1st that Federal Reserve Chairman Warsh, European Central Bank President Lagarde, Bank of England Governor Bailey, and Bank of Canada Governor Macklem all spoke at the ECB Global Central Bank Forum's "Policy Group" event. ECB President Lagarde spoke first. Lagarde stated: "My only regret is that we were bound by forward guidance in the past. Europe and the United States are interdependent on artificial intelligence." Federal Reserve Chairman Warsh stated: "We will not provide forward guidance. We will develop a new direction to make better decisions. The AI boom is particularly evident in the United States. As central bank officials, this is an exciting and significant moment. If we make progress in thinking about the impact on productivity, data, and inflation frameworks, this will be a lesson we can learn from." Artificial intelligence has led to a surge in capital expenditure and a significant increase in demand.
Bitunix analysts: The Federal Reserve has downplayed policy guidance, with "uncertainty premium" becoming the main battleground, rather than the interest rate path.
According to BlockBeats, on July 7th, the focus of global markets is gradually shifting from interest rate direction to policy communication methods. Federal Reserve Governor Waller stated that forward guidance should not be a fixed framework and could even be completely eliminated if necessary, reiterating that the central bank will not deliberately maintain low interest rates to address government fiscal deficits. This means that the market will rely more on real-time economic data rather than pre-determined interest rate paths from central banks, reducing policy predictability. It also means that asset prices will become increasingly sensitive to inflation, employment, and economic data, and market volatility may refocus during periods of major data releases. On the other hand, Middle East risks have escalated again. Reports of missile attacks on merchant ships in the Strait of Hormuz have surfaced again, threatening to shatter the previously established window of easing tensions between the US and Iran. Trump reiterated that he would not rule out escalating military action if negotiations fail. However, Saudi Arabia lowered its official selling price for crude oil to the Asian market in August, reflecting relatively ample supply. The energy market is currently still oscillating between "geopolitical risks" and "supply easing," and whether oil prices can rebound in the short term depends on whether the conflict further impacts actual supply. On the other hand, the issues of Japanese debt pressure and the continued weakening of the yen have resurfaced, and market doubts about the Bank of Japan's policy space have not subsided. The trend of global capital flowing into high-yield dollar assets has not changed significantly. For the crypto market, what truly deserves attention is not a single event, but the loss of the "certainty" provided by central bank forward guidance. As policy begins to rely entirely on data, geopolitical risks escalate, and global liquidity remains tight, the crypto market will continue to be primarily driven by changes in risk appetite and liquidity momentum in the short term. Price movements will continue to be repeatedly disrupted by macroeconomic events and market sentiment. Until capital flows truly form a unified direction, a cautious stance is expected to persist.