Waller Promotes Reform of Federal Reserve Meeting Mechanism: Reducing Rate Decisions and Increasing Strategic Discussions

According to Zhitong Finance APP, starting from 2027, the Federal Reserve will begin to reduce the number of annual policy meetings. For an institution renowned for its stability, this change may seem significant, but in reality, it simply returns the US central bank to its traditional mode of operation.

Chairman Kevin Warsh once promised comprehensive reform at the Federal Reserve. He stated that by 2028, two of the eight annual meetings would be dedicated to discussing broad strategies rather than voting on interest rates.

This adjustment marks the first change to the Fed’s meeting schedule since the early 1980s—when the number of annual meetings was reduced from 12 to 8. Although some investors worry that the new schedule might disrupt markets, supporters argue those fears are unfounded, claiming the move will free up time for policymakers. In recent years, time once devoted to specific issues has been compressed through a series of incremental adjustments.

“This is not unprecedented for the FOMC, even in recent times,” said Loretta Mester. She joined the Fed in 1985, served as President of the Cleveland Fed from 2014 to 2024, and has participated in most FOMC meetings since 2000.

This initiative dates back to the period before the financial crisis, a time Warsh is familiar with—he served as a Fed Governor from 2006 to 2011. During those years, six of the Fed’s eight annual meetings were single-day events, focusing mainly on economic and monetary policy discussions and rate votes; the other two were extended by a day to allow for broader economic topics.

The 2008 financial crisis consumed the Fed’s attention and forced meetings to become longer and more frequent.

In 2012, the Fed officially adopted a standard two-day format. However, post-meeting press conferences were only held after half of the meetings—a mechanism introduced by Chairman Ben Bernanke in 2011. These meetings often ended earlier to give Bernanke time to prepare for the press conference.

After Jerome Powell became chair in 2018, press conferences were expanded to follow every meeting. Most of the work subsequently shifted to the first day, with the second day typically concluding after officials voted on interest rates.

Mester noted that, with less time for discussion, it became harder to both address substantial policy issues and make tough monetary decisions. “Spending a bit more time to truly have these conversations is a good thing,” she said.

Institutional Reform

Warsh has said he hopes to revisit many aspects of the Fed’s operations, from the data used for assessing the economy to its communication methods. Many of his more ambitious proposals still require review and approval from his colleagues.

Earlier this year, Warsh set up a task force of external experts to review five key areas of Fed operations and recommend new ideas. The related reports are expected around the end of the year.

Ellen Meade, Duke University economics professor and former Federal Reserve advisor, said, “If you want to make progress on broader issues, you have to carve out time for that,” recalling her participation in multiple FOMC meetings between 2011 and 2020.

However, Meade noted the details of the new calendar will be critical. The Fed could maintain the current pace of meetings every six to seven weeks, designating two as non-voting sessions; or it could completely restructure the calendar, holding the six voting meetings regularly every two months, with two dedicated-topic meetings in between.

Richmond Fed President Tom Barkin voiced support on Thursday for the idea of holding meetings every two months.

“I really don’t like leaving the FOMC meeting only to get a jobs report on Friday,” Barkin said regarding the current calendar. “If we switch to every two months, we’d actually have two full data cycles for each decision.”

Barkin said this adjustment does not represent a major shift for the central bank. William Dudley, who served as New York Fed President from 2009 to 2018, echoed this view, saying there’s no “magic number” for meetings. He believes what matters most is the market’s understanding of how the Fed may react under different economic conditions—the so-called “reaction function” in economics.

“I’m not sure these changes will make the Fed a more efficient institution in any material way,” Dudley said of these adjustments.

Warsh has said that the current frequency of meetings, along with press conferences after each FOMC session, causes Fed watchers and the market to focus excessively on incremental moves by policymakers.

He argues that the bigger questions—such as changes in productivity or demographics, and how the economy withstands shocks—are ultimately more important.

Both Mester and Meade noted that reducing the number of voting meetings and spacing them more deliberately throughout the year would enable policymakers to gather more economic data between each interest rate decision. This could also avoid awkward timing, such as last week—when officials voted on rates just one day before key third-quarter economic data was released; that meeting also fell just days before midterm elections, casting a political shadow over the Fed’s decision.

However, there are downsides to fewer rate-setting meetings. For one, altering the pace may force the Fed to change its schedule for releasing economic and interest rate forecasts, which currently occur every quarter in line with every other FOMC meeting.

According to a report by Derek Tang, economist at Monetary Policy Analytics, as “live” meetings become less frequent, officials may opt for rate adjustments larger than the traditional 25 basis points. Even the expectation of bigger moves could lead to greater market volatility.

Georgetown University economist Masaaki Yoshimori supports shifting to fewer, better-timed meetings. He noted that as the Fed makes such decisions, it should clearly express its willingness to call additional meetings if necessary.

“The risk of reducing meetings from eight to six may not be that six regular sessions are generally insufficient,” Yoshimori, who met with Warsh in August, wrote in a research paper, “but rather that the longer intervals between meetings may leave more room for unexpected disturbances.”