Warsh pushes for reform of the Fed's meeting mechanism: fewer rate decisions, more strategic discussions.

Starting in 2027, the Federal Reserve will begin shifting toward fewer policy meetings per year. For an institution known for its steadiness, the change looks significant, but in practice it merely returns the US central bank to how it once operated. Chair Kevin Warsh has promised sweeping changes at the Fed. He has said that by 2028, the Fed will devote two of its eight annual meetings to broad strategy discussions rather than voting on interest rates. This is the first adjustment to the Fed's meeting calendar since the early 1980s, when it cut the number of annual meetings from 12 to 8. Although investors worry the new schedule could disrupt markets, supporters argue those concerns are unfounded and say the move will free up time for policymakerstime that had been gradually squeezed out through a series of incremental adjustments once used to discuss specific topics. "This is not unprecedented for the FOMC, even in recent times," said Loretta Mester. She joined the central bank in 1985, served as Cleveland Fed president from 2014 to 2024, and has attended most Federal Open Market Committee (FOMC) meetings since 2000. The move traces back to the years before the financial crisisa period Warsh knows well, having served as a Fed governor from 2006 to 2011. In those years, six of the Fed's eight annual meetings were single-day sessions, devoted mainly to discussing the economy and monetary policy and voting on rates; the other two added a day to address broader economic themes. The financial crisis that erupted in 2008 absorbed all of the Fed's attention and forced longer and more frequent meetings. In 2012, the Fed formally adopted a fixed two-day meeting schedule. But half of those meetings were followed by a chair's press conferencea mechanism introduced by Chair Ben Bernanke in 2011. Such meetings often ended early so Bernanke had time to prepare to take the stage. After Jerome Powell became chair in 2018, press conferences were expanded to every meeting. Since then, most of the work has shifted to the first day, with the second day typically wrapping up after officials vote on rates. Mester said that in the remaining discussion time, it has become increasingly difficult to handle both major, substantive issues and hard decisions on monetary policy. "Having a little more time to actually have those conversations is a good thing," she said. Institutional change Warsh has said he wants to re-examine many aspects of how the Fed operates, from the data used to assess the economy to its communications approach. Many of his larger ambitions still require deliberation and approval from his colleagues. Earlier this year, Warsh set up working groups of outside experts to examine five key areas of the Fed's operations and propose new ideas. Their reports are expected around the end of this year. "If you want to make progress on broader issues, you have to carve out time for it," said Ellen Meade, an economics professor at Duke University and former Fed adviser who attended numerous FOMC meetings between 2011 and 2020. Meade noted, however, that the details of the new calendar will be crucial. The Fed could keep its current rhythm of a meeting every six to seven weeks and simply designate two of them as non-voting meetings; or it could completely restructure the schedule, spacing six voting meetings evenly every two months and interspersing two thematic meetings. Richmond Fed President Tom Barkin on Thursday praised the idea of meetings every two months. "I really don't like walking out of an FOMC meeting and having a jobs report on Friday," Barkin said of the current calendar. "If you go to every two months, you could actually get two full data cycles and make decisions based on two data cycles." Barkin said the adjustment is not a major shift for the central bank. William Dudley, who served as New York Fed president from 2009 to 2018, agreed, saying there is no "magic number" for the number of meetings. He considers it more important that markets understand how the Fed is likely to respond under different economic conditionswhat economists call the "reaction function." "I'm not sure these changes are really substantive in terms of making the Fed a more effective institution," Dudley said of the adjustments. Warsh has said the current frequency of meetings and the practice of holding a press conference after every FOMC meeting lead Fed watchers and markets to focus excessively on incremental moves by policymakers. He says the big questionssuch as what is happening with productivity or demographics, and how the economy withstands shocksultimately matter more. Both Mester and Meade said fewer voting meetings, deliberately spaced throughout the year, would allow policymakers to gather more economic data between each rate decision. It would also avoid awkward timing, such as last weekwhen key third-quarter economic data was released just one day after officials voted on rates; that meeting was also held just days before the midterm elections, casting a political shadow over the Fed's decision. But fewer rate-setting meetings also have drawbacks. First, adjusting the rhythm could force the Fed to change the release schedule for its economic and rate projectionscurrently published on a neat quarterly cadence corresponding to every other FOMC meeting. Derek Tang, an economist at Monetary Policy Analytics, wrote in a note to clients that with fewer "live" meetings, officials might also adjust rates by more than the traditional 25 basis points more frequently. Even the expectation of larger moves could trigger greater market volatility. Georgetown University economist Masaaki Yoshimori advocates a shift to fewer but better-timed meetings. He says the Fed should, while making such decisions, clearly express its willingness to hold additional meetings when needed. "The risk associated with moving from eight meetings to six is not necessarily that six regular meetings, on average, are insufficient," Masaaki Yoshimori, who met with Warsh in August, said in a research paper, "but that unexpected disturbances may occur during the longer intervals between meetings."