A year ago, Kevin Warsh went on TV and called for "regime change" at the Federal Reserve. Now he runs it.
He's getting his overhaul. But the tone is far friendlier than before.
After his first meeting as chair, Warsh set up five task forces. Each one digs into a different part of how the Fed works.
The goal, he said, is a central bank that is "fit for purpose." He wants the groups to start from scratch and question everything.
They will look at how the Fed talks and the data it uses to read the economy. They will also cover inflation, new tech like AI, and its $6.7 trillion balance sheet, the huge pile of bonds it owns.
The Fed held rates steady this week, as most expected. So the bigger story was the overhaul, not the rate call.
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The first change people noticed was how the Fed writes. Its latest note dropped a lot of stock phrases.
It also led with the rate decision itself, the way it did before 2009. One former Fed leader called the old style a "Hotel California" problem.
Her point: once a phrase gets into a Fed statement, it almost never leaves. Two bigger changes are on the table now.
The first is scrapping the "dot plot," the chart where each official guesses where rates are headed. Dropping it would be a big deal, since traders have leaned on it for years.
He may also tweak the news conferences chairs have held for 15 years. Each change sounds small, but together they reshape how the Fed speaks.
The second is shrinking that huge bond pile. The government bonds the Fed owns touch everything from mortgages to savings rates.
A year ago, Warsh slammed the Fed for a "credibility deficit." This week he sounded calm and said he was "incredibly impressed."
Markets hate surprises from the Fed. So a clearer one is usually good for investors.
One strategist called it "regime change, but in a velvet glove." Think of a mechanic who rebuilds your whole engine so smoothly you barely notice.
The Fed has run above its 2% inflation goal for five years. That came after its wrong "transitory" call in 2021.
So the inflation review may matter most here. Getting prices right is the Fed's core job.
The bond pile is another big one. It grew fast in both the 2008 and 2020 crashes.
Warsh has long wanted it smaller. He thinks the Fed owns far too much.
A BlackRock bond chief called the shift "a new era." Some reviews could wrap up by year-end.
For now, these are just reviews, not done deals. Investors will watch closely for what the groups suggest.
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