Bank of America Warns Warsh's 3.50%-3.75% Fed Stance Acts Like Tax on Economy
Updated
Updated · Yahoo Finance · Aug 20
Bank of America Warns Warsh's 3.50%-3.75% Fed Stance Acts Like Tax on Economy
1 articles · Updated · Yahoo Finance · Aug 20
Summary
Bank of America said Kevin Warsh’s reduced use of forward guidance could weigh on growth by leaving investors too uncertain about how the Fed will react to changing data.
At the July meeting, the Fed voted 9-3 to hold rates at 3.50% to 3.75%, and Warsh again declined to signal whether the next move would be a hike, cut or hold.
BofA economists Aditya Bhave and Mark Cabana said the bigger problem is the Fed’s unclear reaction function—especially which inflation gauges Warsh prioritizes and how far inflation can stray from 2% before action.
Warsh has been reshaping Fed communications since taking over earlier this year, saying forward guidance is not well suited to the current environment while reviewing the central bank’s broader inflation framework.