- The economist added that Warsh is inheriting an institution that is deeply fractured internally and lacks credibility externally.
- According to El-Erian, the wide dispersion of views within the FOMC reflects the central bank’s defensiveness amid pressure on its dual mandate of price stability and maximum employment.
- He also highlighted that the success of the “Warsh Fed” will not be measured solely by the Fed funds rate.
Mohamed El-Erian, Chief Economic Advisor at Allianz, warned on Thursday that Kevin Warsh will have to address a long list of problems to restore trust in the Federal Reserve.
“The Fed has made repeated analytical and forecasting errors in recent years, as well as supervisory lapses and monetary-policy slippages,” El-Erian said in an opinion piece for Project Syndicate.
The economist added that the Federal Open Market Committee’s (FOMC) structure makes it susceptible to groupthink and that the institution has experienced mission creep.
He also highlighted that the success of the “Warsh Fed” will not be measured by the Fed funds rate alone, but also by whether it includes an overhaul of the central bank's outdated operational machinery, as well as the strengthening of the underpinnings of the Fed’s balance-sheet policy.
Warsh was nominated by President Donald Trump as his Fed Chair nominee in January.
Fed Deeply Fractured Internally, Says El-Erian
The economist added that Warsh is inheriting an institution that is deeply fractured internally and lacks credibility externally.
“The minutes of the most recent policy meeting read like a thesaurus, with a long list of qualifiers – ‘a few,’ ‘some,’ ‘several,’ ‘a number,’ ‘many,’ and ‘the vast majority,’” El-Erian said, adding that this points to an unusually wide dispersion of views within the FOMC.
According to the economist, this reflects the Fed’s defensiveness due to the central bank’s dual mandate of price stability and maximum employment, both being under pressure, amid President Trump’s attacks on the Fed.
Warsh’s Criticism Of Fed’s Messaging
In a speech at the IMF Spring Meetings in April 2025, former Fed Governor Warsh stated that the Fed’s current wounds are largely self-inflicted, adding that it’s time for the central bank to get policy back on track.
“Near-term forecasting is another distracting Fed preoccupation. Economists are not immune to the frailties of human nature. Once policymakers reveal their economic forecast, they can become prisoners of their own words,” he said.
The Fed Chair nominee added that Fed leaders should skip opportunities to share their latest musings, noting that rhetorically talking about the latest data release is a common problem and counterproductive.
He said he sees little value in the Fed’s data-dependent approach, arguing that relying on backward-looking data, which is subject to significant revision, reflects false precision and analytical complacency.
Meanwhile, U.S. equities were mixed in Thursday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up by 0.04%, the Invesco QQQ Trust ETF (QQQ) fell 0.01%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 0.09%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.
The iShares 7-10 Year Treasury Bond ETF (IEF) was up by 0.02% at the time of writing.
For updates and corrections, email newsroom[at]stocktwits[dot]com.