How Will Less Fed Transparency Affect Markets and the Economy?

September 9, 2026

AI Summary

5 min read

In the July press conference following his first Federal Reserve meeting as chairman, Kevin Warsh delivered a notably brief statement and gave curt answers. The market’s reaction was telling: short-term interest rates fell while long-term rates rose. For former Fed Governor Donald Kohn, that divergence was a clear signal that the new approach was failing. “Long-term rates are building in inflation or uncertainty premiums, risk premiums, term premiums,” Kohn said. “I’m sure that’s not what he would have wanted.” Warsh has signaled a sharp break from the transparency revolution that has defined central banking for the past quarter century—shorter post-meeting statements, less forward guidance, and a more limited role for the dot plot. In a special episode of Goldman Sachs Exchanges, host Alison Nathan spoke with Kohn, former Fed Governor Steven Myron, and Goldman Sachs Chief Economist Jan Hatzius about what a less transparent Fed would mean for markets and the economy.

The Case for and Against Forward Guidance

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What you'll learn

1 (00:05) **The Fed’s Shift to Less Transparency** - The episode introduces the topic of Chairman Kevin Warsh steering the Fed toward shorter statements, less forward guidance, and a limited role for projections, marking a break from the transparency revolution of the last 25 years.
2 (01:00) **Jan Hopsius: The Case for Transparency** - Hopsius argues the transparency revolution has been a net positive, as it allows markets to anticipate policy and enables faster monetary transmission.
3 (02:15) **Hopsius: Nuance on Forward Guidance** - Hopsius distinguishes between "Odyssean" (binding commitments) and "Delphic" (data-conditional) forward guidance, finding the latter more defensible.
4 (04:04) **Don Cohn: Sympathy for Warsh on Guidance, Not on Narrative** - Cohn agrees with Warsh that the dot plot is a weak indicator (easily shifted by one or two voters) and that forward guidance can constrain the committee.
5 (06:55) **Cohn: The Importance of a Narrative** - Cohn emphasizes that a story or narrative, as used by Alan Greenspan, is crucial for the Fed to hold itself accountable and for markets to understand the committee's thinking.
6 (07:37) **Steve Myron: Less Transparency as a Positive** - Myron takes a more supportive view of Warsh’s push, arguing that forward guidance dampens short-term volatility but increases long-term risk and volatility.
7 (09:37) **Myron: The Muddy Distinction Between Guidance and Reaction Function** - Myron acknowledges a theoretical difference between a predetermined policy path and transparency about the reaction function, but finds it blurry in practice.

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Show Notes

Federal Reserve Chairman Kevin Warsh has steered the central bank into an era of less transparency. Former Fed governors Donald Kohn and Stephen Miran, as well as Goldman Sachs Chief Economist and Head of Goldman Sachs Research Jan Hatzius, discuss on the Goldman Sachs Exchanges podcast the merits of Fed communication and how it affects financial markets. The episode is based on the latest Top of Mind report.

Key takeaways:

Kohn says there is a “golden mean” in which financial markets have some information from the Fed, such as a narrative that helps investors process incoming data, without central bank officials providing too much specific information about their policy plans.
Reducing forward guidance would improve the signal that financial markets provide, and the additional volatility is worth the trade-off, Miran says. He argues that too much guidance from Fed officials can increase volatility in the longer run.
Hatzius says markets will always price what they think the Fed will do—not what they think the Fed should do—even if the central bank provides less information about how it adjusts policy in reaction to economic data.

This episode was recorded in August 2026.

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