Warsh Considers Reducing Frequency of Fed Policy Meetings

The Federal Reserve has met at least eight times a year for decades. Reducing the number of meetings would represent the biggest change by Kevin M. Warsh since he became chairman.

Kevin M. Warsh, the chairman of the Federal Reserve, is considering reducing the number of regularly scheduled meetings at which the central bank sets interest rates. The Federal Reserve has met at least eight times a year for decades, with each meeting costing around $250,000 to stage. Warsh's potential move would mark the most significant change in how the central bank operates in years. The reduction in meetings could be to four or six times a year, according to sources familiar with the matter.

A reduction in the frequency of Fed policy meetings would directly affect mortgage rates, which are closely tied to the federal funds rate set by the Fed. With fewer meetings, the Fed would have fewer opportunities to adjust interest rates, potentially leading to more stable, but also potentially higher, mortgage rates for homeowners. This could increase the monthly mortgage payment for a $200,000 home by around $50-100 per month. The impact would be felt most by those with adjustable-rate mortgages or those looking to refinance.

The Federal Reserve's meeting schedule has been in place since the 1970s, with the central bank aiming to meet at least eight times a year to set monetary policy. The current schedule allows the Fed to respond quickly to changes in the economy, but some argue that it can also lead to over-management of the economy. Insiders know that the Fed's decision-making process is complex and influenced by a range of factors, including inflation, employment, and global economic trends. The potential reduction in meetings is part of a broader effort to simplify and streamline the Fed's operations.

The Federal Reserve's next policy meeting is scheduled for March 15, at which point Warsh may announce a decision on the meeting schedule. The Fed will also release its quarterly economic projections, which will provide insight into the central bank's thinking on the economy and interest rates. Interestingly, a reduction in the frequency of Fed meetings could actually lead to more market volatility, as investors would have fewer opportunities to adjust to changes in monetary policy, a fact that may seem counterintuitive given the aim of reducing meetings is to increase stability.