The Federal Reserve chairman's press conference Wednesday was sharply different from his early appearances in the job, when he often seemed backed into a corner. He's shown he is willing to let the markets guess where he is going — at least to a point. And he has started using his authority to reshape the institution.
Warsh was appointed by a president who said cutting interest rates was a litmus test for his choice for Fed chair. When the Federal Open Market Committee opted to hold rates flat in June and July, even with inflation well above the Fed's 2% target, a swarm of commentators questioned the new chairman's credibility. The FOMC's subsequent decision in September to raise rates came with such a hawkish reading of the economy by Warsh that the markets swung sharply in the opposite direction. Investors thought the Fed might be locked into a rate hike this week until a pair of top officials came out and appeared to deliberately temper market expectations.
This week, Warsh put all that behind him. He disavowed any expectation that the Fed is on a set course: "If we had a firm conclusion about the conduct of monetary policy, we'd announce it to much fanfare today," he said.
But Warsh also gave a strong signal that his current lean is toward higher rates. "While overall financial conditions are tighter, I'm unwilling and unable to call them tight," he said.
He was preserving his options while laying the intellectual groundwork for a hike in December, should inflation remain stubborn.