FOMC Update

Research evidence excerpt

FOMC Update

• On press conferences, he indicated that these can be useful for

communications, but that "when you have one you want to make sure

you have something important to say".

• His decision not to participate in the summary of economic projections

(SEP) suggests this may diminish in importance ahead.

3) Balance sheet. In its statement, the Fed reaffirmed its policy of ample

reserves. Chair Warsh indicated that the task force in this area would

i) examine the benefits and risks of the ample reserves regime ii) the

composition of the Fed's balance sheet, and iii) consider alternatives for the

operation of monetary policy.

4) Policy restrictiveness. The Chair indicated he saw this as "uneven",

highlighting housing as one area where he sees restrictiveness and financial

markets as an area where he does not. He highlighted that he believes if the

Fed does its job appropriately it can make strong growth and stable prices

mutually compatible.

5) AI and productivity. Warsh was questioned about whether productivity

driven by AI could be a reason to cut interest rates, a topic he had opined

on in the past.

He refrained from repeating his view on this topic, instead deferring to the

associated task force on this front. His response included several points:

• That AI is filled with a huge opportunity and with risks.

• He believes that over the longer-term, the US will be better off because

of AI.

• That the Fed should examine both the demand side and supply side when

assessing the impacts of AI, and that it should not put more weight on

the demand side merely because it is more straightforward to measure.

6) Labor market. Warsh suggested the committee felt the labor markets

were stable with some feeling that it was trending better than this. He