Fed Chair appoints expert panels to review communications, balance sheet, data and inflation amid cooling CPI

Federal Reserve Chair Jerome Powell told lawmakers that the central bank will convene four task forces to reassess key aspects of its operations. The panels will draw on a mix of former policymakers, scholars and business executives.

For communications, Powell selected former Bank of England governor Mervyn King, ex-New York Fed official Peter Fisher and former Brazil central-bank head Arminio Fraga. He said the Fed “overdoes it when it comes to publicly sharing its next steps,” and has moved away from forward guidance and quarterly forecasts.

The balance-sheet group will be led by economist Raghuram Rajan, Harvard economist Karen Dynan and former Fed governor Jeremy Stein. Powell has long argued that the Fed’s $6.7 trillion holdings of government bonds and mortgage-backed securities have inflated prices and threatened the bank’s independence, while also suggesting closer coordination with the Treasury.

A data task force will be headed by former Walmart CEO Doug McMillon, Harvard economist Raj Chetty and University of Chicago economist Kevin Murphy. Powell said his goal is to “use new technologies to understand what’s happening in the real economy in a contemporaneous, real-time way” and reduce reliance on government statistics that he views as outdated.

To explore the impact of artificial intelligence on productivity and employment, the Fed will consult venture capitalist Marc Andreessen, Stanford professor Chad Jones and Microsoft executive Asha Sharma.

Finally, an inflation panel will include Harvard professor Greg Mankiw, Nobel laureate Thomas Sargent and BIS veteran William White. Powell emphasized that the Fed will keep its 2 percent inflation target and focus on shaping expectations rather than trying to control short-term price swings.

“My aspiration is that nine to 12 months from now we’re going to be using new technologies to understand what’s happening in the real economy in a contemporaneous, real-time way that positions us as central bankers to make better decisions, that we’re no longer going to have to rely solely on data we get from government agencies with mismeasurement problems,” Powell said.

Economists note that the Fed already incorporates private-sector data into forecasts and caution that replacing comprehensive government statistics may be challenging.