Kevin Warsh, the new Fed chairman. [Reuters Yonhap News File Photo]'Speak less, think more'

This is what Kevin Warsh, the new chairman of the U.S. Federal Reserve, advised the Fed in a speech last year.

With the completion of the initial public offering of SpaceX, the largest in history, and the U.S. and Iran agreeing to a Memorandum of Understanding (MOU) to end hostilities, market attention is now focused on the Fed's monetary policy direction.

The Fed will hold a Federal Open Market Committee (FOMC) meeting on the 16th-17th (local time) to decide its interest rate policy. Chairman Warsh is scheduled to hold a press conference immediately after the meeting.

However, given Chairman Warsh's long-held belief that "the Fed should not speak too much," attention is focused on what message he will deliver at this press conference.

The Wall Street Journal (WSJ) reported that while the Fed has believed for decades that open communication with the market about monetary policy is more effective, Warsh is expected to begin demonstrating the opposite at his press conference on the 17th.

Warsh has advocated for a decade that the Fed's stance should be tight-lipped. His reasoning is that excessive communication with the market can bind the Fed with its own statements, making it difficult to effectively implement monetary policy.

Therefore, he intends to revert from the current "enhanced transparency" approach to the closed and cautious era of the 1990s.

The current active communication policy was established by Fed Chairman Ben Bernanke during the 2008-2009 financial crisis. He meticulously explained the rationale behind the Fed's policy decisions to the public to overcome the crisis and actively presented future directions.

Warsh, who was a Fed governor at the time, expressed skepticism about the Fed's bond purchases, a liquidity-providing measure, and resigned in 2011.

Former Fed Chairman Ben Bernanke. [AFP/Getty Images Yonhap News File Photo]

Warsh frequently cites the Fed's incorrect forecasts during the period of soaring inflation in 2021-2022 as a reason why a "tight-lipped" approach is necessary.

At the time, the Fed often referred to inflation as "transitory," a prediction that proved incorrect, leading the Fed to steeply raise interest rates belatedly.

He argues that when Fed officials make forward-looking statements, they feel pressured to defend those predictions for a long time even after circumstances change, and these predictions effectively become firm commitments.

In a speech at the State Street Conference a year ago, Warsh said, "We should do less of what we don't do well. The Fed's predictions at the time were dismal. My own predictions won't be perfect, so I won't offer them."

Warsh also holds a firm conviction that news related to the Fed should not be given prominent coverage.

Since 2015, he has argued that central bank governors should not appear on the front page of newspapers but rather on page B12, the business section. Last year, he also stated that articles about interest rates should be very concise, about six sentences long. In other words, a novice reporter could simply write that 'interest rates are being raised or lowered by 0.25 percentage points.'

The WSJ reported that Warsh is also likely to abolish the "dot plot," a practice adopted by central banks worldwide, including the Fed.

After each FOMC meeting, the Fed has released a dot plot showing committee members' projections for future interest rates. This was created based on the judgment that transparency is important for enhancing policy predictability and efficiency. This was also an idea from former Chairman Bernanke, who believed it was necessary to communicate that monetary policy decisions are not made in a single moment.

In 2003, former Chairman Bernanke argued for the necessity of releasing the dot plot, stating, "Ambiguity has its uses, but it's mostly in uncooperative games like poker. Monetary policy is a cooperative game, and the key is to get financial markets on our side and have them do our work for us."

Although Chairman Warsh is expected to bring about significant changes, he is reportedly adopting a mild and gentle approach rather than making drastic cuts so far.