Warsh's speech signaled that Fed practices over the past forty years have lacked rigor.
“I found this speech in particular to be a very strong kind of message, both a message to the market but also just a kind of message in general that the way the Fed has done business for maybe the last 40 years in some ways has not been as rigorous as it could be,”
Warsh expects to deliver a broad overview of task force work and Fed operations rather than detailed economic analysis or policy guidance.
“If I had to guess, I would say that he's going to give a very high-level, broad look at the work of the task forces and how he thinks the Fed should operate, as opposed to a nuts-and-bolts assessment of the economy and expectations for policy.”
Warsh says he has no particular expectations for what the new Fed chair will say and finds it difficult to predict.
“People keep asking me what I'm expecting, and I'm not really expecting much of anything. I think it's hard to predict what he's going to say,”
Markets have inflated expectations for the Jackson Hole speech beyond what the Federal Reserve intended.
“The market has now bid this up to be something that I think the Federal Reserve would rather it not be.”
A new Fed chair's Jackson Hole speech sets the interpretive framework that will be applied to economic data for the following year.
“New chairs use this stage to set the frame for their tenure, and whatever language he establishes Friday gets applied to every data print for the next year.”