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I think that the FOMC has been doing it wrong for 40 years by allowing the Chair to be a dictator over the committee. The Bank of England and the Bank of Japan don't do it this way. (ECB does not disclose its vote). ---- The committee now is 12 independent voters, with 12 different reaction functions. It should have always been this way, as it's a better approach. Monetary policy should be a consensus-building exercise, where everybody backs up their opinion with a vote, and not dictated by the staff and the chairman. --- Partial list of consequences of Chair/Staff driven Forward Guidance * Between 2003 and 2004, Greenspan said rates would rise at a “measured pace.” The Fed raised rates by 25 bps at 17 consecutive meetings, hiking from 1.00% to 5.25%. By keeping this promise and predictability, the Fed made mortgage financing cheap and predictable, leading to leverage skyrocketing. So, when the downturn came in 2006/2007, this leverage acted as an accelerator in the 2008 financial crisis. * In 2013, Bernanke triggered a taper tantrum by signaling a slowing in their balance sheet expansion. The market feared this meant rate hikes would soon follow, leading to the 10-year yield rising +140 bps in four months. * In October 2018, Powell said rates were “a long way from neutral,” meaning more hikes ahead. In December, he said the balance sheet runoff was on “autopilot.” The S&P 500 fell about 20% from September to Christmas Eve; most of the decline was in the last few weeks. On January 4, Powell reversed publicly, known as the “Powell Pivot,” and the Fed cut rates three times later that year. * July 2019, Powell described the July cut as a mid-cycle adjustment, which markets took to mean one and done. He cut rates three times: July, September, and October. In late September, this uncertainty contributed to a repo crisis when the funding markets became chaotic, and borrowing rates briefly soared to 9%. * March 2023, Silicon Valley Bank had loaded up on long-dated bonds when rates were near zero, and the Fed was promising rates would stay there. When the Fed hiked rates 425 bps in 2022 into 2023, those bonds lost enough value to wipe out the bank’s equity. SVB failed on March 10, Signature Bank on March 12, and First Republic in May. Follow up to above .. Fed’s guidance is taken as a “promise” by markets. This leaves the Fed in a difficult spot: either it has to follow through on a policy that is no longer appropriate, or disappoint the markets by failing to follow up on that promise. We applaud Chair Warsh for sticking to his guns and getting rid of this practice.