Fed Chairman Warsh's latest press conference leaves Wall Street guessing — again

Federal Reserve Chairman Kevin Warsh held his fourth press conference this week, and when it came to defining the economy, inflation, and the path for rate hikes, he once again left Wall Street scrambling to guess his next move.

Michael Feroli, chief US economist for JPMorgan, said the press conference "left something to be desired," most notably, "a simple explanation for why the committee didn't tighten."

The performance harkened back to Warsh's July press conference when the chair left markets with a lack of clarity about the Fed's willingness to raise rates. Warsh repeatedly pointed to bond yields shooting higher, suggesting it was a good thing and implying that the Fed welcomes higher yields to tighten policy through markets. His stance initially triggered higher long-term bond yields, causing confusion and damaging market confidence in the Fed's strategy.

Warsh responded in a highly anticipated speech at the Fed's annual symposium in August, giving Wall Street a measure of clarity on how the central bank would respond to rising prices.

But some analysts saw his press conference this week as a step backward.

When pressed by reporters on why the central bank refrained from raising rates , Warsh avoided direct economic measures. Instead, Feroli said Warsh veered into a winding, abstract maze of rhetoric, invoking phrases like "new monetary medicine," "interrogating reality," and "looking out the window."

Feroli pointed to New York Fed president John Williams and Fed Vice Chair Philip Jefferson, who both offered rationales ahead of the meeting for accumulating more data before raising rates further.

"One can debate the merits of the arguments for a pause laid out by Williams and others, but at least they were couched in a discussion of the economic data," Feroli said. "Without a clear answer, it is understandable that the market has become a little less convinced there is a plan to tighten in December."

The Fed's policy statement added a line echoing Jefferson and Williams, saying "the accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2 percent goal."

Greg Daco, chief economist for EY, took the added sentence to mean that this week's decision was a "hawkish hold," but he said Warsh still "fell short" by failing to provide a coherent argument for not raising rates.

"Saying that the Fed is not committed to a data point or a date does little to assuage concerns about inflationary pressures," Daco said. "There is indeed a contradiction in talking tough on price stability after a six-year-long overshoot and refusing to take ownership by repeatedly saying the Fed is 'interrogating reality' by 'looking out the window' to gauge true economic conditions."