Federal Reserve Chair Kevin Warsh told members of the U.S. House Financial Services Committee that the Federal Reserve would give ample warning to lawmakers and market participants before changing its balance sheet policy.
Speaking at a committee hearing, Warsh said any prospective modifications to the Fed's balance sheet would be presented in advance, explained in detail and subjected to debate prior to implementation. He stressed the importance of clear, early communication to both Congress and the financial markets.
Warsh noted that his perspective on the central bank's substantial balance sheet is already publicly known, but he added that he would refrain from prejudging decisions expected from a new Fed balance sheet task force. He framed the balance sheet as an element of monetary policy and underscored a desire to avoid conflating that role with fiscal policy.
"I want to assure you that if there were a change in balance sheet policy, that we would preview it, explain it, debate it, and no changes in balance sheet policy would happen without good advance notice to the likes of this committee and broadly financial market," Warsh said.
The chair's remarks focused on process and transparency. By committing to preview and debate any changes, Warsh indicated the Fed intends to provide windows for congressional oversight and for market participants to adjust. At the same time, he explicitly declined to anticipate the conclusions of the Fed's internal task force charged with reviewing balance sheet practices.
Warsh also reiterated a boundary between monetary operations and fiscal decision-making, saying the Fed should steer clear of fiscal policy. His statements to lawmakers placed procedural safeguards at the center of any future balance sheet adjustments, emphasizing notification and public discussion as prerequisites for action.
Clear summary
Kevin Warsh told the House Financial Services Committee the Fed will preview, explain and debate any changes to balance sheet policy and will provide advance notice to both Congress and financial markets. He said his views on the large balance sheet are known but would not prejudge the new balance sheet task force's decisions, and he emphasized keeping monetary policy separate from fiscal policy.