Deep Dive: The Federal Reserve Explained

For two decades, investors built portfolios around a Fed that telegraphed its next move. Kevin Warsh has a different vision. Here is how the Fed works and what Warsh wants to change…

Newly confirmed Fed Chair Kevin Warsh chaired his first FOMC meeting this week. In his first decision as Chair, Warsh held the benchmark rate at 3.5–3.75% in a unanimous vote, but the Fed’s own projections now show nearly half the committee expecting a hike before year-end, as seen in the chart below. Each dot = one FOMC participant’s year-end projection for the federal funds rate Warsh abstained from submitting a dot, signaling a potential change to the future Summary of Economic Projections (SEP). Understanding why any of this matters starts with understanding how the Federal Reserve…