By Howard Schneider
WASHINGTON, July 10 (Reuters) – At a moment of political polarization and a White House distancing itself from “globalization,” Federal Reserve Chairman Kevin Warsh’s choice of foreign central bankers and Obama-era appointees on his Fed reform task forces has gotten strong early reviews for relying heavily on expertise even as other independent U.S. agencies are being stripped of it.
The Fed in recent U.S. Supreme Court rulings was exempted from otherwise blanket authority granted to President Donald Trump to fire members of independent agencies that for nearly a century had been insulated from removal because of policy or other disagreements, freeing Warsh from the day-to-day pressure of threatened firing he might otherwise be under for angering Trump or his base.
Over a week where Trump fired members of the independent Election Assistance Commission and held combative talks with other members of the North Atlantic Treaty Organization, Warsh announced he had tapped 15 Fed outsiders, five of them foreign-born, including the former heads of the central banks of Brazil, England and India, and two of them former appointees to high-level jobs by President Barack Obama, to lead his centerpiece reform effort.
While the group also included top Trump fundraiser and tech investor Marc Andreessen, it was considered overall an A-list and independent group, likely reflecting Warsh’s own inclinations, and importantly more evolutionary than revolutionary — a contrast to Warsh’s promises of “regime change” before he took over.
“We’re talking about serious, respected people that will likely buoy the chair’s credibility with his own colleagues,” said Neil Dutta, head of economics at Renaissance Macro Research, even if some seem “ideologically predisposed” to Warsh’s skepticism about issues like a large Fed balance sheet or forward guidance about interest rates.
Not all are so aligned — former Fed Governor Jeremy Stein, a 2012 Obama appointee named to the balance sheet task force, has argued large Fed holdings can improve financial stability — and some of the panels are less focused on policy debates and more on open-ended topics like how to improve the data the Fed relies on in setting monetary policy. Warsh sees the potential to do better with new technologies, a position that would find little disagreement in the Fed, with issues like how to pay for and corroborate new data initiatives more of an issue than whether there are good ideas to pursue.
Members of the task forces contacted by Reuters said it was too early to comment about how they will proceed. The Fed announcement did not include details about the process.
‘SERIOUS AND BROADLY BALANCED GROUP’
Previous major shifts in Fed strategy have been overseen by internal committees, such as changes to communications policies and the introduction of formal inflation targeting in 2012. In 2019 and 2020, a broader review of the Fed’s policy framework included extensive public hearings around the country to collect views about the economy, plus commissioned academic work presented at a conference in Chicago. A 2025 review relied heavily on internal research and outside academic analysis, including by former Fed Chair Ben Bernanke.
The Warsh review seems to be another variation. Much as Warsh was tasked by the Bank of England in 2013 to review its communications and public disclosure policies, and Bernanke a decade later to consult on BoE forecasting, the review has turned outside the institution in a process the Fed said “will operate independently, with a mandate to follow the evidence.”
Unclear still is how the Fed’s seven governors and 12 Reserve Bank presidents will participate in a process targeted for conclusion by year end.
There are already strong opinions among policymakers about issues like how much the Fed could shrink its balance sheet, or how far it could retreat in communicating information without either leaving markets unsettled or damaging its own legitimacy — a sensitive issue for unelected officials whose rate decisions directly affect households’ economic fortunes.
Suggested changes in communications practices just last year, for example, foundered in an internal stalemate.
Krishna Guha, a former New York Fed staffer and now vice chair at Evercore ISI, called the task force appointees “a serious and broadly balanced group that will be taken seriously by the market, Fed staff, and members of the FOMC.”
“We view this as a good first step on institutional and policy reform and a win for Chair Warsh,” Guha said, while noting Warsh’s colleagues will have a say in any consequential reform, typically only possible at the Fed with near unanimous consent.
“Even with an impressive group running the independent task forces, the current FOMC, which includes figures with deep expertise on areas such as the balance sheet and policy communication, will not simply roll over and adopt whatever the outside experts propose,” he wrote following the task force announcement.
(Reporting by Howard Schneider; Editing by Dan Burns and Andrea Ricci )
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