{"id":409762,"date":"2026-07-23T18:54:34","date_gmt":"2026-07-23T18:54:34","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/409762\/"},"modified":"2026-07-23T18:54:34","modified_gmt":"2026-07-23T18:54:34","slug":"is-it-a-good-idea-to-limit-federal-reserve-rate-guidance-san-diego-union-tribune","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/409762\/","title":{"rendered":"Is it a good idea to limit Federal Reserve rate guidance? \u2013 San Diego Union-Tribune"},"content":{"rendered":"

New Federal Reserve Chair Kevin Warsh recently told Congress<\/a> he would provide less guidance about the Fed\u2019s next interest rate moves than his predecessors.<\/p>\n

It\u2019s common for Fed chairs to forecast thoughts on if rates may come up or down. Yet Warsh\u2019s first policy statement<\/a> dropped guidance on the future path of rates.<\/p>\n

One concern is less guidance could inject more volatility into markets<\/a>. In general, Warsh has argued too much communication from central banks can hinder markets<\/a> and investors from responding to real world data.<\/p>\n

Question: Is Warsh on the right track with a plan to limit Fed rate guidance?<\/p>\n

Economists<\/p>\n

David Ely, San Diego State University<\/p>\n

NO: At times, communicating likely future monetary policy actions can lessen the flexibility of the central bank and cause financial market participants to react to expected central bank actions rather than economic fundamentals. So, Warsh\u2019s creation of a task force to evaluate communication around policy deliberations and decisions is welcome. However, in addition to ending forward guidance, the new Fed chair seems to be reluctant to describe a clear framework for making monetary policy decisions.<\/p>\n

Ray Major, economist<\/p>\n

YES: There is no need for the Fed to telegraph months ahead of time what their rate policy will be. Rate guidance removes the Fed\u2019s flexibility to make decisions using the most up-to-date information and to act too slowly when they need to. Markets function best when they react to incoming economic data itself, rather than obsessing over and trying to decode the exact semantics of future Fed speeches. Overall, this was a good move on behalf of the Fed.<\/p>\n

Caroline Freund, UC San Diego School of Global Policy and Strategy<\/p>\n

YES: Transparency is generally good, but forward guidance cuts both ways. When rates are near zero, guidance is one of the few tools left to stimulate the economy. When inflation surprises on the upside, officials who have publicly committed to a path can be slow to abandon it, delaying tightening. That may help explain 2021. With rates well above zero and inflation still the risk, limiting guidance makes sense. But shelve the tool, don\u2019t scrap it.<\/p>\n

Kelly Cunningham, San Diego Institute for Economic Research<\/p>\n

YES: With the goal of ultimately ending the Fed, limiting Fed influence is a step in the right direction. The Fed causes inflation by increasing the money supply while attempting to facilitate government overspending, putting upward pressure on prices. Artificially manipulating interest rates, keeping them too low for too long, creates economic \u201cbubbles\u201d that inevitably burst into severe recessions. These policies disproportionately benefit large Wall Street banks and the wealthy, whose assets appreciate, while wage earners suffer from rising prices.<\/p>\n

James Hamilton, UC San Diego<\/p>\n

YES: In 2011 and again in 2020, the unemployment rate remained high even though the Fed had brought the interest rate to zero. To try to stimulate the economy, they tried announcing that they would keep rates low for a long time on the theory that the announcement itself could stimulate the economy. This backfired badly in 2022, when the Fed waited too long to raise rates. The Fed cannot promise what it\u2019s going to do next year.<\/p>\n

Norm Miller, University of San Diego<\/p>\n

YES: Limiting Fed rate guidance may raise uncertainty and market volatility, but it also protects credibility when the economy diverges from projected paths. In a less predictable economic environment (wars, tariffs, climate disasters, mass cyberattacks, government shutdowns), offering less explicit guidance helps the Fed avoid being tied to a predetermined strategy. Still, providing conditional guidance remains very valuable, especially when the Fed clarifies which indicators it is monitoring and how those factors shape its thinking.<\/p>\n

Executives<\/p>\n

Austin Neudecker, Weave Growth<\/p>\n

NO: The Fed should strive to be as transparent as possible. Less guidance risks unnecessary market volatility. Businesses make decisions based on expected borrowing costs, and clear communication helps them plan. Forward guidance is not a promise that overrides data, while explaining how policymakers interpret inflation, employment, and growth strengthens credibility and accountability. The\u00a0Fed should provide conditional guidance, not silence. Markets can respond to new data without being forced to guess at the Fed\u2019s intentions.<\/p>\n

Chris Van Gorder, Scripps Health<\/p>\n

NO: While the Federal Reserve should avoid communicating a specific rate path, forward guidance remains an important tool to remove uncertainty. The solution is better conditional communication, not less. Eliminating or sharply limiting guidance could increase market volatility and make monetary policy less predictable.<\/p>\n

Jamie Moraga, Franklin Revere<\/p>\n

YES: Prior to the 2008 economic crisis, the Fed operated more behind the scenes rather than providing forward guidance and intervention (think quantitative easing). Returning to limited guidance can allow markets to move more freely and react to real-time economic data. That said, pulling back too far can create short-term volatility and uncertainty, so the Fed should aim for a balance between a clear policy framework and avoiding overly detailed forward guidance.<\/p>\n

Phil Blair, Manpower<\/p>\n

NO: A wise politician once told me that the one thing government owes to its constituencies is consistency. Avoid surprise whenever possible. If the chief of the Fed has information that can legally and ethically be shared before the announcement date, he should be obligated to do so. We should avoid panic reactions to decisions that are hidden for weeks.<\/p>\n

Gary London, London Group Realty Advisors<\/p>\n

NO: Guidance isn\u2019t the enemy \u2014 bad guidance is. Warsh has a point that pinning the Fed to a forecast can backfire when data shifts fast. But going completely dark, with a committee already split down the middle on rates, doesn\u2019t reduce noise \u2014 it creates it. Markets will just build their own guesses, and those tend to be messier than the Fed\u2019s. Less talk, not silence.<\/p>\n

Bob Rauch, R.A. Rauch & Associates<\/p>\n

YES: Warsh\u2019s push to limit or even eliminate forward guidance is broadly consistent with his stated philosophy of shorter statements and removal of forward\u2011looking language. Warsh believes markets have grown overly dependent on Fed signals, and he has no desire to walk back guidance when the Fed must pivot. He\u2019s a \u201cless talk, more data\u201d type of Federal Reserve chair, and his plan is both coherent and consistent. He\u2019s on the right track.<\/p>\n

Not participating this week:Alan Gin, University of San DiegoMark Kersey, San Diego County Taxpayers Association<\/p>\n

Have an idea for an Econometer question? Email me at phillip.molnar@sduniontribune.com<\/a>. Follow me on Threads: @phillip020<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"New Federal Reserve Chair Kevin Warsh recently told Congress he would provide less guidance about the Fed\u2019s next…\n","protected":false},"author":2,"featured_media":409763,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28],"tags":[387,383,181,74,76,75,1696],"class_list":["post-409762","post","type-post","status-publish","format-standard","has-post-thumbnail","category-san-diego","tag-business","tag-economy","tag-latest-headlines","tag-san-diego","tag-san-diego-headlines","tag-san-diego-news","tag-top-stories-sdut"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/409762","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=409762"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/409762\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/409763"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=409762"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=409762"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=409762"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}