Kevin Warsh has broken nearly thirty years of tradition—after being nominated, he did not appear alongside President Trump and has remained "invisible," making no public statements. If he successfully takes the helm of the Federal Reserve, this deliberate silence will be his first significant policy signal.

Source: Jinshi Data

The last time President Trump nominated a Federal Reserve chair in 2017, he appeared with Jerome Powell in the White House Rose Garden, praising Powell's "wisdom and leadership." Powell then promised to ensure that the Federal Reserve was always ready to respond to evolving risks and market changes.

But this time, Trump announced the nomination of Kevin Warsh to replace Powell via social media early last Friday, and Warsh has not made any public appearances since.

Economists are surprised and disappointed by this absence of any public statements, as public commentary has been a routine part of the Federal Reserve nomination process for nearly thirty years.

Why was there no formal introduction from the White House or an appearance by Warsh? Economists believe that Warsh's silence over the past few days may be the first sign that the Federal Reserve will reduce its public communications—an aspect of how Warsh hopes to change the central bank's operations.

Since leaving his position as a Federal Reserve governor in 2011, one of Warsh's standard criticisms of the Federal Reserve has been that its officials talk too much.

"The leaders of the Federal Reserve would do well to forgo the opportunity to share their latest thoughts. The practice of waffling in response to the latest data is common and counterproductive," Warsh stated last April.

Former Atlanta Fed President Dennis Lockhart, in an interview with CNBC after Warsh's nomination, noted that this has been a complaint about the Federal Reserve for years. Some have described the Fed's communications as "jarring noise," which confuses the market without adding any value.

"Maybe he (Warsh) can bring order to this situation—but I'm not so sure," Lockhart said.

Federal Reserve officials have not always struggled to communicate with the market and the public. Before the 1990s, central bank governors around the world believed it was best to say little or nothing about their work.

Montagu Norman, who served as the Governor of the Bank of England for 24 years after World War I, adhered to the motto: "Never explain, never excuse."

In 1987, then-Fed Chair Alan Greenspan told a U.S. senator at a hearing: "If my words seem too clear to you, then you must have misunderstood my meaning."

However, since then, economic researchers have convinced the Federal Reserve that to make interest rate policy effective, it needs to be transmitted through financial markets, and if the market understands the central bank's policies, better outcomes can be achieved. Typically, the market can do part of the work for the Fed by lowering long-term rates based on data.

Warsh can unilaterally decide the frequency and content of his communications. How will he proceed? No one knows for sure. But economists are confident that an era of reduced communication is approaching.

Michael Gapen, head of U.S. economic research at Morgan Stanley, stated that reducing communication from Fed officials aligns with Warsh's view that the central bank has been too involved in market dynamics.

"There are still central banks that act in ways that surprise the market; the Reserve Bank of Australia and the Swiss National Bank are examples. Not all central banks are as communicative as the Fed," Gapen said.

But he added that this also means the Fed may have to accept and endure higher volatility in the stock and bond markets.

"There’s no such thing as a free lunch. If they want to reduce communication a bit and leave things to the market, that's fine, but it also means the market may operate to some extent based on views that ultimately prove incorrect," Gapen said.

There is speculation that Warsh will reduce the number of press conferences held. Currently, sitting Fed Chair Powell holds eight press conferences each year.

"We believe Warsh's communication style may be more streamlined and less scripted than that of his predecessors," said Anthony Saglimbene, chief market strategist at Ameriprise.

Saglimbene indicated that he does not believe Warsh will seek to reduce the quarterly economic forecasts released by senior Fed officials, at least not immediately.

However, he added that speaking less when there is no crisis may not be a bad thing. Saglimbene pointed out that even with extensive speaking, the market's expectations of the Fed's future actions are often incorrect.

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