Analysts believe regulators may consider abandoning the median forecast to reduce perceptions of it as the committee's official position, but are unlikely to significantly reduce transparency.
Fed Chairman Kevin Warsh's newly established working groups will likely recommend only incremental changes to US monetary policy rather than sweeping reforms. Broad consensus within the central bank will limit the scope of any changes, according to a Goldman Sachs report.
The report notes that five working groups—on Fed communications, the balance sheet, economic data, artificial intelligence, and inflation mechanisms—could develop compromise measures that address a number of Warsh's long-standing criticisms while remaining acceptable to other members of the Federal Open Market Committee (FOMC).
Regarding communications, Goldman Sachs notes that the most realistic change would be a revision of the Fed's "Summary of Economic Projections," rather than its complete elimination.
The report also notes that there is little appetite within the Fed to abandon the excess reserve mechanism, despite Warsh's criticism of quantitative easing and the central bank's large balance sheet. While officials may review the composition of the Treasury portfolio, Goldman Sachs believes any changes will have a limited impact on the market, as the US Treasury will be able to adjust its debt placement strategy.
Regarding economic data, the bank notes that greater use of private sector data is likely, but it will complement official statistics rather than replace them, as alternative data are often not representative enough, lack uniform seasonal adjustment, and lack long-term continuity. The report also notes that, although Warsh asserts the structural disinflationary effect of artificial intelligence, most Fed officials are unlikely to change current monetary policy based on uncertain forecasts for future productivity growth. Goldman Sachs also expects only minor adjustments to the Fed's inflation framework—for example, greater emphasis on money supply indicators—while the central bank generally maintains its current approach.