Fed communication regime change and market implications (with Annmarie Hordern, Dani Burger)

Torsten Slok expects a significant shift in Fed communication under Warsh, possibly reducing forward guidance and the dot plot. This would introduce uncertainty but give the Fed more flexibility. He notes the strong economy (AI boom, fiscal stimulus) argues for a more hawkish stance, but lower oil helps. He sees no signs of the economy slowing down.

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Torsten Slok 8.5

Fed communication regime change and market implications (with Annmarie Hordern, Dani Burger)

ndx

Slok notes the AI boom is a tailwind for the economy, but the strong economy and sticky inflation argue for a more hawkish Fed, which could cap upside for growth stocks.

yields

The number of words in the FOMC statement could move down to levels seen under Alan Greenspan.

10 calls

no reliable edge (random outcomes)

5/5/2026 6:12:22 PM	short term cautious up	5 days later	+1.24%	+0.62%
4/3/2026 7:31:50 PM	medium term up	21 days later	+0.02%	+0.02%
3/27/2026 8:49:47 PM	medium term up	21 days later	-2.12%	-2.12%
3/27/2026 7:30:29 PM	medium term up	21 days later	-2.12%	-2.12%
12/23/2025 11:03:06 PM	long term up	61 days later	-2.59%	-2.59%
10/28/2025 5:15:14 PM	medium term cautious up	20 days later	+1.60%	+0.80%
10/13/2025 6:26:53 PM	medium term cautious up	20 days later	+2.09%	+1.04%
10/9/2025 2:13:08 AM	medium term sharp up	20 days later	+1.04%	+1.56%
8/29/2025 2:18:36 PM	short term sharp down	6 days later	-5.40%	+8.10%
8/15/2025 11:30:11 PM	medium term cautious down	21 days later	-6.80%	+3.40%

Show all 10 yields results

Asks whether the statement needs to be read first or just do a quick word count.

Annmarie Hordern
Torsten Slok

We certainly need to read it first. The key issue is what style of communication we will get, particularly regarding forward guidance. This is still a very unclear area.
Asks if Slok expects a complete rewrite of the statement, as Betsy Duke suggested.

Annmarie Hordern
Torsten Slok

That is something we should expect as one of the outcomes. The market has been used to very well-anchored expectations around the dot plot for 15 years. The discussion is whether to have an anchor or not, which would give more flexibility to the FOMC.

If the world changes, it's not good to have an anchor.
Asks if removing forward guidance makes the Fed more hawkish because it removes the residual easing bias.

Dani Burger
Torsten Slok

Yes, particularly around rates. Warsh has also focused on shrinking the balance sheet. A compromise could be not changing much on rates communication but signaling a smaller balance sheet, which is implicitly tightening. The strong labor market and high inflation argue the Fed should be tightening financial conditions.
Asks if Warsh will want to galvanize consensus like Powell did, and how challenging that will be.

Dani Burger
Torsten Slok

Warsh knows what he is doing, but the challenge is he needs the other 11 voting members on board with any changes. He needs to get them on his side. The number of dissents will be important.

Decisions about rates, QE, QT are voted on by 12 members.
Asks if we will get less Fed speak under Warsh.

Annmarie Hordern
Torsten Slok

That is really challenging because telling regional Fed presidents they are not allowed to talk is not possible. The market will continue to put more weight on the Fed chair.
Asks if the Iran deal makes things less complicated for Warsh.

Dani Burger
Torsten Slok

Absolutely. Inflation is still at 3% vs 2% target. Lower energy prices are one good news, but we still have a strong economy from the AI boom and fiscal stimulus, plus upward pressure from tariffs. He is helped by lower oil, but the economy shows no signs of slowing down.

High frequency indicators (TSA, retail, hotel demand) are all very strong.

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