A Massive Change Likely Coming To The Fed And Markets May Not Like It

Kevin Warsh could replace Jay Powell, potentially ending forward guidance and the quarterly dot plot, while shifting the Fed toward a smaller balance sheet. Warsh views quantitative easing as fiscal policy in disguise and favors using interest-rate policy as the primary macro tool. The prospect of a major Fed framework change is market-wide and likely to move rates, bonds, and risk assets.

Analysis

Kevin Warsh could replace Jay Powell, potentially ending forward guidance and the quarterly dot plot, while shifting the Fed toward a smaller balance sheet. Warsh views quantitative easing as fiscal policy in disguise and favors using interest-rate policy as the primary macro tool. The prospect of a major Fed framework change is market-wide and likely to move rates, bonds, and risk assets.