The Federal Reserve is weighing a reduction in the number of times per year its rate-setting committee meets, a move that some market experts say could increase uncertainty for stock and bond investors.
According to CNBC, the idea of cutting the eight-meeting-per-year schedule of the Federal Open Market Committee has been discussed inside the Fed, though one Fed source described those conversations as mostly hypothetical. Even so, the possibility is drawing attention given the broader changes already underway under Chairman Kevin Warsh.
Since taking office in May, Warsh has moved to pull back on the level of transparency that has defined the Fed for decades. He has curtailed so-called forward guidance, dramatically shortened the post-meeting statement, and given what CNBC described as cryptic and often evasive answers during his two news conferences. Reducing the number of meetings would extend that same philosophy further.
For investors, fewer meetings means fewer scheduled moments when the Fed communicates its thinking about the economy and interest rates. Markets have long used those meetings as anchoring events, adjusting portfolios around each decision and the language that accompanies it.
"Certainly, it's going to increase volatility," said George Catrambone, head of fixed income for the Americas at DWS Group. "Having less transparency forces market participants to hedge or have a wider dispersion of outcomes."
Not everyone inside the Fed sees the change as alarming. Minneapolis Fed President Neel Kashkari told CNBC he is open to revisiting the schedule. "I don't think there's any magic number about eight or 10 or six. You know, we always have the ability to call emergency meetings if things happen, but that's a big event," he said. "When the FOMC calls an emergency meeting, it really sends a signal that we're concerned about something. And so, you know, I think I'm open-minded. I don't have a strong view."
Philadelphia Fed President Anna Paulson expressed a similar openness Tuesday, telling CNBC, "It's healthy to have a good discussion about that."
Bill English, the Fed's former head of monetary affairs during Warsh's first tenure at the central bank and now a Yale professor, offered some historical context. The Fed met nearly monthly until the early 1980s, when it moved to eight meetings a year under Chairman Paul Volcker. English himself once proposed reducing that to six, paired with a news conference and an economic projections update at each session. "There's nothing magical about eight meetings," he told CNBC. "There are costs associated with having a lot of meetings, but on the other hand, you don't want to have so few meetings that you end up not acting in a timely way."
English described eight meetings as close to the right number, though he acknowledged the case for fewer is not unreasonable if each remaining session is made more substantive. The Fed retains the ability to call emergency meetings at any time, but as Kashkari noted, doing so carries its own signal to markets, one that suggests something has gone seriously wrong.
No formal proposal has been announced, and the discussions remain at an early stage. The next scheduled FOMC meeting will draw extra scrutiny as observers watch whether Warsh signals any structural changes to how and when the committee conducts its business.
