Economist Calls for Rules-Based Federal Reserve Policy Under Warsh

An economist at the Cato Institute is advocating a return to a rules-based approach to U.S. monetary policy as Federal Reserve Chairman Kevin Warsh begins reviewing the central bank's policy framework, Emily Russell and Liz Moyer reported for Barron's Daily.

Economists are calling for the Federal Reserve to adopt a more rules-based approach to setting interest rates..

Warsh recently announced five task forces that will examine the Federal Reserve's inflation and labor market frameworks, communications strategy, balance sheet policy, and data sources.

Their recommendations are expected later this year.

Economist Jai Kedia, who co-authored a nine-part report on Federal Reserve reforms, argues that the central bank should scale back public guidance on interest rates, reduce its regulatory role, shrink its balance sheet, and return to a rules-based framework such as the Taylor Rule, which links interest rates to inflation and economic growth.

Kedia believes strengthening the relationship between monetary policy and economic fundamentals should be a key objective of Warsh's reform agenda.