Goldman’s Hatzius Warns Warsh’s Fed Style Could Stoke Volatility as Hike Odds Hit 61%
Updated
Updated · Yahoo Finance · Sep 10
Goldman’s Hatzius Warns Warsh’s Fed Style Could Stoke Volatility as Hike Odds Hit 61%
1 articles · Updated · Yahoo Finance · Sep 10
Summary
Jan Hatzius said Kevin Warsh’s reluctance to explain the Fed’s reaction function could create “unproductive volatility,” because investors will still try to infer policy with less information.
Warsh has rejected detailed forward guidance on the funds-rate path, while Hatzius said crisis-era rate-path signaling is unnecessary but transparency about the Fed’s thinking remains important.
At Jackson Hole, Warsh stressed inflation is still above the Fed’s 2% target and said policymakers must be sure underlying price pressures are falling fast enough, reinforcing a hawkish tone.
Treasury yields rose after those remarks, and traders priced in a nearly 61% chance of a rate hike at the mid-September FOMC meeting instead of the cut or softer stance some investors had hoped for.
The communication shift marks a break from Jerome Powell, Janet Yellen and Ben Bernanke, raising the risk that markets face bigger swings as they adjust to a less explicit Fed.