Wall Street won’t like it—but Kevin Warsh may mark the end of your chatty, neighborhood Fed chairman
When Jerome Powell leaves the meetings that set the U.S. Federal Reserve’s base rate to go talk to the press, analysts and investors are on the edge of their seats. His nominated replacement, Kevin Warsh, wants their butts firmly and comfortably planted—preferably on a deep, over-stuffed couch. “The central bank should find new comfort in working without applause and without the audience at the edge of its seats,” he told an International Monetary Fund lecture last year.
For many years, Warsh has advocated for a “backseat Fed.” He has been critical of the central bank’s perceived over-communication, which he says leads to market expectations and potentially broken promises. Wall Street, in the early days, will likely be uncomfortable with the change.
Investors and analysts have grown accustomed to a level of transparency from the Fed. Powell helpfully sharing his views on the economy in monthly press briefings, and there are updates from regional bank presidents on how they see the path of monetary policy shaping up. During the recent period of heightened economic uncertainty, such signals have been all the more welcome.
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Until yesterday, many might have hoped that Warsh’s criticism of forward guidance was an ideal rather than an actionable opinion. They were wrong.
Warsh told a Senate Banking Committee hearing: “The Fed tells the whole world what their dots are going to be, what their forecasts are going to be. Well, the Fed’s human then they hold on to those forecasts longer than they should.” Here, Warsh is referring to the dot plot, a chart published by the Fed four times a year that shows where each of its top policymakers expect short-term interest rates to head—it’s one of the most closely watched tools in central banking communications.
“If the Fed were to wait until it gets into a meeting before making a decision, incremental deliberation can keep the central bank from compounding its errors. I think these are big changes that are needed, and if confirmed, I look forward to doing it,” he added.
Wall Street won’t like to lose any insights it can glean into the thinking of the Fed—but neither will it deny that in the long term, it might be what’s best for the central bank.
Wall Street versus reality
“I don’t think the market would like it” if the beloved dot plot and its ilk was removed from the hands of investors, Jack Manley, global strategist at J.P. Morgan Chase told Fortune in an exclusive interview. “I don’t think the market would permanently be in a tizzy about it,” he adds.
“It is an extraordinarily helpful way to at least figure out where multiples should be,” Manley explained. “Having a rough idea of the trajectory of monetary policy helps to feed into how we think about whether something is considered richly valued, or not so richly valued—it would be sorely missed.”
However, as Fortune reported last year, despite criticism from the White House that the base rate is contributing to a housing crisis, the correlation between Powell’s policy stance and mortgage rates is tenuous at best. As Morgan Stanley noted in October, the spread between mortgage rates outstanding and new mortgage rates was over 2%, the highest it had been in 40 years.
“We pay a lot of attention to the federal funds rate even though almost nobody actually experiences it,” Manley added. “Those of us that do experience it—namely the big banks—haven’t really changed their behaviors in any way. It is fascinating and also very sad that the overnight rate in the United States is compressed by 175 basis points since September ’24 [but] a 30-year fixed-rate mortgage is now higher than it was back then.”
Moreover, analysis from Cox Automotives last year found that despite the Fed cuts, the average auto loan rate was continuing to increase year on year, while Lending Tree reported that in the final quarter of 2025, monthly auto repayments hit a record average of $767—up 2.8% from Q4 2024.
“The benchmark rates that consumers have paid have been totally disconnected from Fed funds for a very long time,” Manley added. “If you’re thinking about the Fed funds rate as the thing that’s going to dictate the cost of money more broadly across the U.S. economy, and as a result through U.S. capital markets, you’ve been wanting on that for quite some time.”
The argument might sound similar to the likes of J.P. Morgan Chase CEO Jamie Dimon, who is backing the Trump administration’s push to scrap quarterly reporting in favour of longer-term thinking: “Why not be structural, strategic stewards of capital as opposed to managing day-to-day like buybacks and dividends or whatever?” Manley added. “It’s a very similar argument, and the market would be fine.”
Question of transparency
A central theme of Warsh’s hearing was the question of sock puppetry: Rather, whether he will defend central bank independence from political pressure from the White House. In any normal hearing, the question would be inevitable (the nominat