BNY Markets’ John Velis and David Tam examine upcoming Federal Open Market Committee (FOMC) minutes from Kevin Warsh’s first meeting as Chair. They argue that a more restrained communication style could make the minutes more market-relevant, with hawkish-leaning markets vulnerable to a less hawkish tone. The authors warn that silence or reticence may be interpreted as a deviation from perceived Federal Reserve views.

Warsh’s style and market perception

“During an otherwise quiet data week, the FOMC will release the minutes for the June meeting, Warsh’s first.”

“Ironically, even if the text itself is even more parsimonious and sterile than usual, the Fed’s shift toward a more restrained communication style could make these minutes more market-relevant, given that we did NOT get the typical raft of post-meeting Fedspeak.”

“On balance, the minutes may not actually be overtly dovish, but the absence of much hawkishness on the other side of the debate could catch a market that’s already leaning hawkish by surprise.”

“Until markets fully calibrate to the new, more spartan communication style, we believe there’s a risk the absence of clear communication will be interpreted as a rejection of the Fed’s current market view, whatever that view is today.”

“While markets will parse the minutes for clues about the Fed’s reaction function, we’ll be watching for clues about the markets’.”

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