The FOMC decided to hold interest rates steady in October, a move that largely aligned with market expectations. Although monetary policy strategy” rather than setting the fed funds rate. By 2028, this will increase to two strategy-focused meetings per year.
“If there are no other changes to the schedule, that means that for one or two meetings, there will be a 12- or 13-week gap between policy meetings, increasing the importance of getting the calibration right at those meetings,” Feroli said. “Until the FOMC clarifies its schedule, the market is not only still left ‘playing the referee’ but in effect not knowing what ballfield the ref will show up at.”
“Business surveys, pass-through from energy costs and import prices all suggest that core inflation could remain firm in the near term.”
Earlier this summer, Warsh established five task forces to conduct an independent evaluation of the Fed’s policymaking procedures, with findings expected by the end of 2026. During the press conference, Warsh declined to provide a timeline update despite inquiries. These task forces are not anticipated to shift J.P. Morgan Global Research’s baseline interest rate forecast.
The task forces cover the following areas:
Debates are currently centered on whether to discontinue forward guidance tools like the dot plot, which illustrates each official’s interest rate projections. “This is not a sure thing, however, particularly as the dot plot amplifies the influence of the Reserve Bank presidents in policy messaging,” Feroli said. “Moreover, it’s not clear what would replace the dot plot if it’s eliminated. Without a replacement, this would be a step backward in transparency.”
The communications task force might also suggest reducing the frequency or duration of press conferences. “While this is an option that would align with some of Warsh’s stated preferences, it would also be ceding more of the monetary policy narrative to other members of the committee, thereby diminishing his own importance,” Feroli added.
The Federal Reserve currently maintains an expansive balance sheet to guarantee sufficient bank reserves. However, Warsh has pushed for a reduction in the balance sheet size, which could theoretically limit the Fed’s market influence while curbing inflation by removing liquidity from the system.
This will be closely scrutinized by the balance sheet task force, which could make the case for consolidation. “There is a way to reduce bank demand for reserves without disrupting the money markets and the effective transmission mechanism for monetary policy,” said Jay Barry, head of Global Rates Strategy at J.P. Morgan. “However, it will take significant changes to the supervisory backdrop, the liquidity regulatory framework and, frankly, the payment system.”
“The remit of the data task force will inherently be constrained by the Fed’s mission; after all, the Fed is a central bank, not a statistical agency,” Feroli said. That said, its members might still recommend greater use of alternative data for policy decisions.
While Warsh has criticized official government data for being outdated and infrequent, J.P. Morgan Global Research has observed that the accuracy of initial U.S. jobs reports has improved over time, even as statistical agency budgets have tightened. “In recent polling, a large majority of economists say sufficient funding for the statistical agencies should be a priority, and bipartisan groups have made similar arguments. Whether the data task force agrees with this consensus or instead sticks closer to Warsh’s views will be interesting to watch,” Feroli added.
Warsh has indicated that this task force will examine the economic impact of AI and other general-purpose technologies, as well as their implications for Fed policy. Although he has previously suggested that the U.S. “is on the verge of a productivity boom” and that “AI will be a significant disinflationary force,” he has provided little detail on how increased productivity would specifically lower inflation.
“One possible channel could be lower unit labor costs if wages don’t rise in sync with productivity. Another channel could be faster GDP growth leading to a jump in government tax revenue that reduces budget deficits — assuming policymakers don’t respond with offsetting fiscal easing,” Feroli said.
Overall, J.P. Morgan Global Research does not anticipate any immediate monetary policy shifts resulting from this task force. “The Federal Open Market Committee (FOMC) likely agrees that AI could spur faster productivity, but will want to pursue a wait-and-see approach to how that affects inflation and unemployment,” Feroli added.
Warsh has challenged the Fed’s existing framework, proposing that inflation is primarily driven by government fiscal policy and that AI will act as a disinflationary catalyst. Consequently, he may use this task force to expand the committee’s analytical re
“This task force could recommend more diverse approaches to modeling inflation, consider target bands, and place more weight on monetary, credit, balance-sheet and financial indicators,” Feroli said.
“Overall, while the task forces are likely to generate recommendations aligned with Warsh’s preferences, any significant change to the Fed’s policy framework or interest rate outlook will require broader buy-in from the full FOMC,” Feroli said. “The structure of these being the chairman’s task forces — rather than systemwide efforts — means that translating recommendations into actual policy may be gradual and subject to internal debate.”
