Chair Warsh has communicated very little at his first two press conferences, aiming to increase policy flexibility and free markets to “play the ball, not the referee.” This is a marked change from his predecessors who viewed frequent communication as a form of transparency and helpful guidance. Some of Warsh’s desired reforms, however, are subject to FOMC approval and cannot be implemented unilaterally. In this episode, we talk with Narayana Kocherlakota, former President of the Minneapolis Federal Reserve, about how the Fed approached communication through the GFC, the process for reforming FOMC procedures, and the optimal balance between monetary policy flexibility and guidance.<br><br>Simply Put: Expert perspectives on the trends influencing fixed income, banking, and the macro landscape, hosted by FHN Financial’s Macro Strategist, Will Compernolle. Tune in to better understand what’s moving the markets and what to keep an eye on in the weeks and months ahead. Listen and subscribe wherever you get your podcasts.

Narayana Kocherlakota on Optimal Fed Communication

Simply Put

You're listening to Simply Put, a podcast from FHN Financial. I'm your host, Will Compernolle. Fed Chair Kevin Warsh believes the Fed's approach to communication the past 20 years has made policy less flexible and distorted otherwise useful signals from financial markets. After two post-meeting press conferences under his leadership, traders are still working out what this change means for the Fed's policy path and longer-term inflation. Meanwhile, the frequent public appearances of his

FOMC colleagues are a helpful reminder that Warsh cannot implement every change unilaterally. On today's episode, we talk with Narayana Kocherlakota, former president of the Federal Reserve Bank of Minneapolis, about how Fed communication has evolved since the financial crisis, how policy guidance can shape economic activity today, and the optimal trade-off between transparency and policy flexibility.

Stay tuned. Coming up soon, our interview with Narayana Kocherlakota. But first, a quick market update. Payrolls fell 23,000 in July, far below the consensus for positive growth of

80,000, with downward revisions of 103,000 to the prior two months. The bulk of the headline print came from a decline in local government education jobs, a category particularly sensitive to seasonal adjustment issues during the summer months. The unemployment rate fell from 4.2% in June to 4.1% in July. The Fed left rates unchanged last week, as expected, and made only a slight tweak to the policy statement. There were three descents in favor of a 25 basis point rate hike. Chair Warsh's

second press conference was another departure from what market participants got used to under his predecessors. His preference for less guidance sounded at times like his commitment to restoring price stability was more talk than action. The curve twisted steeper during the press conference, and 30-year treasury yields reached another fresh high since 2007.

Narayana Kocherlakota on Optimal Fed Communication

Read the full transcript

The candid version is on a podcast,
not the earnings call.

Narayana Kocherlakota on Optimal Fed Communication

Read the full transcript

The candid version is on a podcast, not the earnings call.

The candid version is on a podcast,
not the earnings call.