Federal Reserve Chair Kevin Warsh has declined to provide forward guidance at his two most recent post-FOMC press conferences, breaking with the practice of his predecessor Jerome Powell. Warsh argues that signaling future rate moves interferes with market efficiency by substituting the Fed's interpretation for incoming data, and that the committee should not feel bound by prior signals when circumstances change. After his latest press conference, bond markets interpreted his silence as inaction on inflation, triggering a steep sell-off that sent the Dow Jones Industrial Average down 840 points. Investors should brace for heightened volatility around FOMC meetings as long as Warsh maintains this policy.
Fed chair's refusal to provide forward guidance led to bond sell-off, raising yields.
