Waller: Balance Sheet Adjustments Will Be Well-Telegraphed, Working Group Expected to Reach Conclusions by Year-End
Claire Weston
Fed Chair Kevin Warsh told Congress that any balance-sheet policy change will be fully telegraphed to markets and lawmakers. Five internal working groups are in 'exploration mode,' and he wants substantive conclusions by year-end. This means → no sudden shift in the near term, but the year-end deliverable will formally put framework reform on the FOMC agenda.
What exactly did Warsh promise on the balance sheet?
Warsh stated explicitly: no change to balance-sheet policy will happen without full advance notice to both Congress and financial markets.
He acknowledged his long-standing criticism of the current balance-sheet stance, but stressed he will not pre-judge the working groups' findings.
This means → Warsh is signaling that change is coming, but routing the specifics through a structured process. Markets need not price in a sudden pivot.
What does "the edge of power" refer to?
Warsh invoked former Fed Chair Paul Volcker's warning: when the Fed's holdings outsize the market, the central bank sits at "the edge of its power."
In plain terms = if the balance sheet grows too large, the Fed is effectively doing what the Treasury does — spending. That crosses the line.
Warsh drew a firm boundary: "We want to get out of the fiscal-policy business."
Where do the five working groups stand?
The Fed currently has five working groups, all in what Warsh called "exploration mode."
He asked each group to "go back to first principles, start from a blank sheet of paper," and reassess existing practices.
Recommendations will go to all 19 FOMC members. Warsh pledged "there will be no secrets" and offered to share progress with Congress regularly.
What does this mean for markets?
The near-term signal is clear: balance-sheet policy will not shift abruptly. Warsh's "full advance notice" pledge sets a floor under expectations.
The pivotal date is year-end — Warsh wants substantive working-group conclusions before the year is out, at which point framework reform formally enters the FOMC agenda.
This reflects Warsh's playbook: lock in market calm with a transparency pledge, then use the working-group process to build the runway for future adjustments. The tempo is "slow start, full warning."
Content is for reference only, not financial advice.