New Fed Chair Kevin Warsh Sparked a "Credibility Shock" on Wall Street After His Latest Rate Decision. Here's Why Investors Should Care.
The new Fed Chair is trying to reset the way the Fed communicates with Wall Street.
Overview
New Federal Reserve Chairman Kevin Warsh is upsetting Wall Street. But he's doing it on purpose, changing a dynamic that has been in place since the turn of the century. The switch has investors crying foul and questioning the Fed's credibility. There's a lot going on here, and investors definitely need to understand what's happening. Here's a quick look.
At the turn of the century, the bursting of the dot-com bubble caused a massive market shock. In response, Fed Chairman Alan Greenspan began providing forward-looking statements to soothe the market. During the Great Recession, one of the deepest economic downturns in history, Greenspan's successor, Ben Bernanke, began providing even more explicit guidance. That level of guidance remained in place until this year, when new Fed Chair Kevn Warsh started to pull back on the guidance.
Image source: The Federal Reserve.
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Originally published at www.fool.com.