Author: Yang Chen, Wall Street Insights
Federal Reserve Chairman Wash is considering cutting the number of regular policy-setting meetings held by the Federal Open Market Committee (FOMC) each year. If implemented, this would be one of the most significant operational changes at the Fed in decades and represents the most substantial policy move to date under Wash's leadership of the central bank.
According to The New York Times, citing informed sources, Wash floated the idea of adjusting meeting frequency during this week's Fed meeting. The new meeting schedule could be finalized ahead of the next policy meeting in mid-September, although specific changes might not be formally implemented until later.
Reducing the frequency of policy meetings would mean fewer opportunities to vote on interest rates, breaking with the established convention of 'eight meetings per year, roughly every six weeks' that has been in place since 1981, fundamentally reshaping how the Fed steers the economy.
This move could potentially weaken the Fed's ability to respond to changes in inflation and the job market, while also reducing channels for the market to receive monetary policy signals, reversing the Fed's decades-long trend of continuously enhancing transparency.
Sources reveal that during this week's meeting, Wash provided an overview of the relevant legal authorizations, including the minimum number of meetings the Fed is required to hold annually and scheduling. He did not organize a formal discussion at the meeting but instead asked officials to provide their feedback directly to him afterward.
The 1935 Banking Act established the Fed's modern structure, stipulating that the FOMC 'shall meet at least four times each year.' The Chairman, or any three members of the Committee, may call meetings.
The Fed's official website has already published meeting dates for the remainder of this year and for 2027, with a note stating that 'each meeting date is tentative until confirmed at the preceding meeting.'
It is worth noting that Wash himself previously stated during Congressional confirmation hearings that four meetings were 'not enough' and that 'holding more meetings is appropriate.' This creates a certain contradiction with the current direction of discussion to reduce meetings, leaving uncertainty about the final extent of adjustment.
The Fed's system of eight policy meetings per year was established in 1981 under then-Chairman Paul A. Volcker and has remained in place ever since.
This regular cadence has established a predictable framework for Fed officials, staff, as well as Wall Street investors and market forecasters. Before each meeting, Fed staff prepare detailed briefings and forecast materials known as the 'Tealbook'; minutes are published six weeks after the meeting; and the full meeting transcript and briefing materials are released only after five years.
Cutting the number of meetings not only means fewer voting opportunities but could also compress the information window for the public to understand the Fed's judgment on the interest rate path, potentially further reducing policy transparency.
This aligns with Wash's overall style since taking office: he has significantly shortened the policy statements released after each meeting, rarely publicly elaborates on his views regarding the economic situation and interest rate direction, and has raised the possibility of scaling back the post-meeting press conferences, which became customary starting in January 2019.
Historically, the Fed's meeting frequency has not been static. Before the current arrangement was established in 1981, the Fed met quite frequently, holding 19 meetings in 1956 and 12 formal meetings plus multiple emergency conference calls during the peak of the inflation crisis in 1978.
Reducing the number of meetings is part of Wash's broader push for 'institutional reform' since he took the helm of the Fed in May this year.
The core narrative of his tenure has been to implement 'institutional reform' at an organization he has long criticized. To date, this vision has materialized into five working groups covering topics such as the Fed's external communication methods and preferred data sources.
This is not the first time the Fed has examined this issue. An internal memorandum from 1988 shows that two senior staffers, including Donald Kohn who later became Vice Chair, assessed the pros and cons of increasing meeting frequency, noting that more frequent meetings had the 'advantage of more timely consideration of new information' but also entailed 'more preparation work and travel inconvenience.' The memo ultimately concluded that the arrangement of eight meetings 'could still be considered appropriate.'
Now, Wash's reform direction runs counter to that 1988 assessment. If the plan to cut the number of policy meetings is implemented, its profound impact on market information flow, Fed policy flexibility, and the communication methods between the central bank and the market will continue to be closely scrutinized.
