Fed Chair announces new era for central bank

Federal Reserve Chairman Kevin Warsh announced a new era at the Fed in his first news conference at the helm of the central bank, signaling his plan to make it quieter with less engagement with the markets and one that squarely focuses on tackling inflation.

Warsh spoke at his first news conference as Fed chair on Wednesday, after overseeing his first Fed policy meeting. All 12 members of the Federal Open Market Committee voted unanimously to hold rates at a range of 3.5 percent to 3.75 percent for a fourth meeting in a row.

The new Fed chair was clear about his core focus. "I've said for years inflation is a choice," Warsh told reporters. "You bet it is."

He added that he was committed to bringing inflation back down to its 2 percent target. The Fed will next meet in six weeks.

In new projections, policymakers said they expected overall inflation to be 3.6 percent by the end of the year, higher than they had predicted three months ago. Core inflation would be 3.3 percent, The New York Times reported.

In a departure from his predecessor — former Fed Chair Jerome Powell — Warsh identified a series of changes that he intends to make in his new role.

"The recent past need not be prologue," he said while discussing the fact that inflation was higher than the Fed's target for more than five years.

One of his first small changes was to the usual Fed statement, which he said was "a bit shorter, a bit simpler and dispenses with some older language" and focuses on "the facts as best as we can judge it".

In another change, he declined to submit an economic forecast to the Fed's Summary of Economic Projections, including its "dot plot", CNBC reported. But he did allow his colleagues to submit one.

He also opted to end the "forward guidance", which is a hint in Fed statements about where interest rates may be heading in the future.

"I can't give you any forward guidance about what we're going to do next," he said. "The good news is we'll be meeting in six weeks."

In his speech, he said it was important at any institution during "a change in leadership" to "reaffirm its mission, to review current practices, and to consider whether those practices best meet our objectives".

He announced that five task forces will reexamine the core functions of the central bank.

They will address communications, the balance sheet, data sources, productivity trends and jobs.

Warsh said that he will be "enlisting some of the very best minds, both inside and outside the economics profession", for discussions on the task force. They will be paired with Fed staff.

In another departure from his predecessor, Warsh did not offer explicit guidance on interest rates and did not talk about how the Fed will decide when to adjust rates.

Analysts said that this could make it tough for investors to determine what the central bank will do next.

He stated that the financial markets would be entering "a new chapter" with the central bank.

He also stated that the labor market is stable.

Warsh, 56, was nominated by President Donald Trump in January as the replacement for former chair Powell. He took over as the 17th Fed Chair in May.

He served on the Fed's Board of Governors from 2006 to 2011, and previously worked as an executive at Morgan Stanley and the Duquesne Family Office.

His predecessor had a fractious professional relationship with Trump as he would not cut rates, even after several demands to do so by the US president.

Asked about the Fed's decision to maintain rates, Trump said on Wednesday: "It's all right, whatever."

The new Fed chair takes over as inflation reached a three-year high of 4.2 percent in mid-June, mainly due to higher gas prices, data from the government said.

Warsh said he plans to keep talking with the media, as news conferences are useful for communicating, if he has "something to say".

The bond market sold off when the Fed released its projections on Wednesday afternoon and again during Warsh's news conference, The Wall Street Journal reported.

But Warsh said he was not interested in immediate market reactions.

Other economic challenges include oil prices falling sharply after the deal to end the US-Israel war with Iran was reached.

It took immediate effect late Wednesday after both sides signed it, Pakistan's Prime Minister Shehbaz Sharif said.

While seeking Trump's nomination, Warsh had called for "regime change" at the Fed.

He reportedly prefers the communication style of Alan Greenspan, the Fed's chair from 1987 to 2005, who was less outspoken than Powell, The Associated Press and Reuters reported.

"The changes to the policy statement were profound," Thomas Simons, chief US economist at Jefferies, wrote in a note. "Policy statements became much wordier after the global financial crisis, so this is a return to a more Greenspan-era style of post-meeting communications."