Federal Reserve Chair Kevin Warsh has reportedly consulted a “broad and intellectually diverse group” of economists and former central bankers to oversee the five task forces he is forming to review the US central bank’s operations, a fact-finding operation that will cover technical issues like management of the monetary authority’s balance sheet as well as the impact of artificial intelligence (AI) on the broader domestic economy.
The task forces, which got announced by Warsh at the press conference following his first policy meeting as Fed chief on June 16-17, will be led by 15 people. These groups will use Fed staff to get the required assistance but “will operate independently, with a mandate to follow the evidence, provide candid feedback, and produce rigorous findings for the Federal Open Market Committee,” the Fed said in a statement.
Among the prominent names included in the group, we have Harvard University economics professor Raj Chetty, a pioneer in the use of alternate and real-time data in analyzing how households and neighborhoods are faring. The panel also has famed tech investor Marc Andreessen among three co-leads, who will focus on areas like productivity and jobs. Greg Mankiw, who was chair of the Council of Economic Advisers in the George W. Bush administration, will be co-leading a task force on inflation.
Economist Raghuram Rajan, the former governor of the Reserve Bank of India (RBI), and Xbox CEO Asha Sharma are also among those selected to lead three of the panels.
“The Federal Reserve’s commitment to price stability and maximum employment is unwavering. As is our resolve to pursue our mandate with rigor. I am honored that the best minds from a range of disciplines have agreed to work with us to sharpen our performance as an institution. The goal is straightforward: to ensure the Fed is best positioned to achieve our objectives in this consequential time,” Warsh said on June 17, while announcing the formation of the task forces for the first time.
Rajan will serve on the “Balance Sheet Policy” task force alongside Harvard economist Karen Dynan and former Federal Reserve Governor Jeremy Stein. The panel has been entrusted to examine the costs, benefits, and institutional implications of the Fed’s current balance sheet regime, including its asset holdings and their role in implementing monetary policy. As per Warsh, the central bank’s balance sheet, currently worth about USD 6.7 trillion, should be reduced.
The “Data Task Force” consisting of Chetty, Walmart CEO Doug McMillon, and University of Chicago economist Kevin Murphy will focus on improving the quality and timeliness of real-world economic signals that inform the Fed’s policy decisions. Chetty is famous for using large administrative and real-time datasets to study economic mobility, inequality, and labor markets in the world’s largest economy.
Asha Sharma will serve on the “Productivity and Jobs Task Force” alongside Andreessen and Stanford economist Charles Jones. The panel will assess the economic impact of emerging general-purpose technologies, including AI, on the United States’ productivity, employment, and economic growth.
Warsh, who served as a Fed governor from 2006 to 2011, had been critical of the central bank’s approach to monetary policy and its maintenance of a large balance sheet in the trillions of dollars. Ahead of his nomination by President Donald Trump for the Fed Chair’s post, he was advocating the use of cutting-edge, “real-time” data to put Fed decisions more in sync with the economy while bringing into the mix the possible influence of AI on productivity and jobs.
“By turning the review of those five key areas over to outside experts, the best minds from a range of disciplines, the process will contrast with recent Fed reviews that were driven more by internal analysis and discussion,” said Warsh.
However, the role of the Fed’s seven governors or 12 regional Reserve Bank presidents in the task force reviews hasn’t been stated in detail yet.