This week's FOMC meeting is full of suspense, with Warsh taking his first bold step in office: stop explaining everything?

Kevin Warsh will attend his first monetary policy meeting in his tenure as the Fed Chair less than a month after taking office. This Wednesday's meeting is unlikely to bring any interest rate changes, but it will be the first window for the market to observe how Warsh reshapes the world's most influential central bank.

Warsh has long argued that the Fed "talks too much" and promised to implement a "regime change" - style reform of the central bank's communication mechanism. According to media reports on Sunday, his core logic is that the Fed has been constrained by its own communication mechanism - excessive forward guidance, frequent speeches by officials, and the controversial "dot - plot" interest rate forecasts have not only failed to improve policy effectiveness but have also weakened the central bank's credibility and flexibility.

The most watched question this week is whether he will refuse to submit the dot - plot forecasts and how he will host the "must - watch" press conference.

However, Warsh's reform ambitions face real - world constraints. The war in Iran has pushed up energy prices, and inflation has remained above the Fed's target. Some officials have started discussing the possibility of raising interest rates - which directly conflicts with the path of interest rate cuts that Warsh promised during his candidacy. Economists admit that they have little idea about Warsh's next move.

Communication Reform: Warsh's First Movable Card

With limited room for maneuver in interest rate policy, reforming the communication mechanism has become the area where Warsh can take action most quickly.

Reports say that Warsh said bluntly at an investor event last year: "Stop talking so much. Think more and talk less." He believes that Fed officials feel obliged to defend their forecasts after releasing them. Even when the economic situation has changed fundamentally, this "forecast equals commitment" mechanism reduces policy flexibility. He cited 2021 as an example - the Fed repeatedly characterized inflation as "transitory," inadvertently raising the threshold for self - correction.

"If you're not good at something, you should do it less. These forecasts have been terrible. My own dots won't be perfect either, so I won't submit them." According to a speech script seen by the Wall Street Journal, Warsh said this at a meeting at State Street last year.

The most watched detail this week is whether he will refuse to submit the dot - plot forecasts. This move does not require a vote and is "inaction" rather than "active action," but it is enough to shake the authority of this tool. Vincent Reinhart, former head of the Fed's monetary affairs department, said bluntly: "If you don't believe in the project, submitting the forecasts is hypocritical."

In terms of the press conference, the market also has high expectations. Michael Gregory, deputy chief economist at BMO Capital Markets, wrote in a client report that this first post - meeting press conference will be a "must - watch TV show." The focus of external attention includes: Will the press conference be shorter and more concise? How will Warsh respond to the question of inflation remaining above the target?

Interest Rate Dilemma: The Promise of Rate Cuts Meets the Reality of Inflation

Warsh promised to cut interest rates during his candidacy, which is in line with the White House's policy preferences. But the economic environment he faces after taking office is completely different.

According to MarketWatch, economist Julia Coronado expects that six Fed officials will include interest rate hikes in their forecasts for this year at this meeting - a significant shift, as no officials predicted policy tightening this year in March.

Joseph Brusuelas, chief economist at RSM US, characterized this situation as "the core dilemma at the start of the Warsh era": "He won the job by promising to cut interest rates, and the administration is also calling for rate cuts. But the recent price increases and the spread of inflation make any rate cuts extremely difficult."

It is almost certain that the benchmark interest rate, which currently stands between 3.5% and 3.75%, will not be adjusted at this meeting.

There are obvious differences in views on Warsh's interest rate stance. Richard Moody, chief economist at Regions Financial Corp., believes that Warsh may start to lay the groundwork for resuming rate cuts after inflationary pressures subside and may reiterate his view that artificial - intelligence - driven productivity increases will create room for low interest rates. Ben Emons, founder of FedWatch Advisors, believes that Warsh may propose reducing the balance sheet to cool the economy as an alternative to raising interest rates.

Some economists also believe that Warsh may change course and accept the possibility of potential interest rate hikes, distancing himself from Trump's policy preferences.

The Boundary of "Regime Change": Reformer or Diplomat?

Warsh declared a "regime change" when he took office, but according to media reports, insiders revealed that his actual actions so far have been much more moderate than expected - "more like courtship than a chainsaw."

He has not replaced any senior Fed staff since taking office and personally invited Michelle Smith, the chief of staff who served under four Fed chairs - Powell, Yellen, Bernanke, and Greenspan - to stay. One of his first recruits was John McConnell, a speechwriter who wrote for President Bush - an intriguing signal: a chair who wants the Fed to talk less still cares about the weight of his words.

Glenn Hubbard, former chairman of the Council of Economic Advisers under the Bush administration, commented: "Kevin has excellent political skills and can bring people together."

However, the structural resistance to reform cannot be ignored. The tools that Warsh wants to abandon were established and defended by the 18 colleagues he now needs to win support from. James Bullard, former president of the St. Louis Fed, warned that if Warsh remains silent while other officials continue to give economic outlook speeches, it may create a situation of "unilateral disarmament" - the chair gives up the right to speak, while "agents" occupy the public opinion field.

There are also voices against reducing communication transparency. William English, a former senior Fed advisor, said: "This will really make them less transparent and less accountable. I don't like it." George Saghir, a senior global macro investor, warned that the Fed's forecasting framework provides an anchor for the market. "Take away this anchor? Be careful."

Between Campaigning and Reform: The Biggest Test for the New Chair

Warsh's situation is also constrained by a factor beyond his control: Trump has publicly pressured the Fed to cut interest rates for a year and vowed that the new chair will fulfill this promise. Any successor will start under the shadow of the question of "whether to serve the White House."

There were four dissenting votes at the Fed's last meeting - Stephen Miran supported rate cuts, and three regional Fed presidents were worried about inflation - indicating that the committee is ready to defend its independence.

According to the Wall Street Journal, Warsh's statement last year calling for a new "agreement" with the Treasury Department made some colleagues uneasy, as this wording is reminiscent of the historic agreement in 1951 that established the Fed's independence.

James McCann, senior economist at Edward Jones, admitted: "We really don't know. There may be a real surprise next week. I'm completely open - minded about how he will speak and how he will position policy."

The Wall Street Journal quoted Ethan Harris, a senior Wall Street economist, to point out the core tension: being an effective campaigner is very different from being an effective reformer. The new chair's influence is greatest at the beginning of his tenure, but reshaping the Fed's communication methods and operating logic depends not on orders but on persuasion - this is a project measured in years.

This article is from the WeChat official account "Wall Street Insights," written by Zhao Ying, and is published by 36Kr with authorization.