Warsh's plan to cut Fed meetings to six may lift volatility

Fed Chair Kevin Warsh is weighing the biggest change to the central bank's meeting schedule in four decades, a shift that would narrow the market's window into policy signals.

Warsh has floated cutting the Federal Open Market Committee's eight annual rate-setting meetings to six, a move that would break a schedule in place since 1981 and concentrate market attention on fewer policy dates. The proposal, raised at last week's FOMC gathering and reported by the New York Times and Bloomberg, would add two sessions focused on broader economic topics rather than immediate rate decisions.

"This will certainly increase volatility. Reduced transparency will force market participants to hedge risk or accept a wider range of outcomes," said George Catrambone, head of Americas fixed income at DWS Group.

Since Warsh took office May 22, the two-year Treasury yield has risen about eight basis points and the 10-year yield a similar amount, while the Fed has held its policy rate at 3.50%-3.75%. The Federal Reserve Act sets a legal minimum of four meetings a year, well below the current cadence, meaning Warsh would not need congressional approval to implement the change.

With $31.1 trillion in publicly held debt and Treasury financing costs projected at $1.3 trillion this year, a bearish steepening of the yield curve would raise the government's borrowing bill. Interest expense now ranks second only to Social Security in federal outlays. A decision could come before the Fed's September meeting, with the central bank's late-August Jackson Hole symposium the next window for signals.

A 40-year convention under review

The eight-meeting rhythm was fixed by then-chair Paul Volcker in 1981, roughly one session every six weeks, and has given investors a highly predictable framework for policy. The cadence has not been static historically: the FOMC met 19 times in 1956 and held 12 formal sessions plus emergency calls at the peak of the 1978 inflation crisis. Warsh's interest in meeting frequency is long-standing — his 2014 "Warsh Review" for the Bank of England recommended cutting that central bank's sessions from 12 to eight, a change adopted in 2016. The ECB moved to a six-week cycle in 2015.

Officials have been cautious in response. Minneapolis Fed President Neel Kashkari told CNBC that "there's nothing magical about eight, 10 or six" meetings, adding that emergency sessions would signal genuine concern. Philadelphia Fed President Anna Paulson said a full discussion "would be useful." Bill English, a Yale professor and former head of monetary affairs at the Fed, said he had once proposed six meetings a year with press conferences at each, but now considers eight "close to the right number" while voicing deeper reservations about Warsh's broader communications pullback.

Fewer meetings, sharper focus

The trade-off centers on responsiveness. With fewer scheduled sessions, the Fed would have fewer routine opportunities to adjust rates as conditions evolve, widening the gap between data surprises and policy responses. Traders would need to recalibrate around emergency meetings as the only route to an off-cycle move, a dynamic that typically draws outsized market attention.

The proposal extends Warsh's "reduce the Fed's presence" strategy since taking office in May. He has shortened post-meeting statements, cut forward guidance, declined to submit his own dot-plot projection in June, and given oblique answers on the rate path at his two press conferences. "Market participants are learning to watch the ball, not the referee," Warsh said last week. "In my view, that is a good shift, and we are just beginning." He has also created five working groups covering communications, data sources, the balance sheet, AI's economic impact and inflation analysis.

Komal Sri-Kumar, president of Sri-Kumar Global Strategies, warned the change could trigger a bearish steepening, with long-end yields rising faster than short-end as fixed-income investors read a low short-term rate as a signal of higher inflation expectations. "Bondholders are not children who need to be led by the hand," he said. "They are just saying, please don't make our lives harder by introducing more uncertainty." Treasury Secretary Scott Bessent has described Warsh's overall approach as a "detox" for markets.

The last time the Fed compressed its communication cadence was after the 2008-2009 financial crisis, when then-chair Ben Bernanke introduced press conferences every other meeting to reduce market guesswork. Warsh's reversal of that transparency push carries risk if a downturn arrives: without clear forward guidance, bond and equity markets could swing more sharply on each data release. Dario Perkins, global macro head at TS Lombard, said Warsh's strategy would create "a mechanism of continuous market repricing," forcing investors to trade without knowing the outcome of meetings in advance.

This article is for informational purposes only and does not constitute investment advice.