One of Warsh’s first important appointments: appointing two Federal Reserve economists as advisors, focusing on interest rate research.

New Federal Reserve Chairman Walsh quickly formed a core advisory team early in his tenure, promoting two senior economists with decades of deep experience from within to serve as advisors, providing policy and analytical support for the institutional reforms he has pledged to advance.

The "New Fed Whisperer" Nick Timiraos reported that Daniel Covitz, Deputy Director of the Federal Reserve's Research and Statistics Division, and Eric Engstrom, Senior Assistant Director of the Monetary Affairs Division, will serve as Walsh's advisors.

Both are long-term Fed employees with deep knowledge of the institution's operational mechanisms, while Walsh has pledged a systematic overhaul of the agency.

These appointments are among the first initiatives Walsh has implemented since taking office last month. Walsh has also brought in two conservative policy veterans from outside the Fed system and a former White House speechwriter to further bolster his team.

Last week, Walsh announced the formation of five special task forces to reassess the Fed's communication methods, data analysis approaches, and asset portfolio management. These task forces will be composed of external experts, supported by professionals from the relevant internal Fed departments.

Internal Promotions, Following Precedent

These appointments are not without precedent. Walsh's predecessors also commonly selected one or two senior advisors from the existing staff early in their terms.

Covitz has spent nearly three decades at the Fed, with research spanning financial stability and credit markets. During Walsh's tenure as a Fed governor from 2006 to 2011, Covitz frequently appeared as a contributor in Walsh's speeches, and the two have a deep history.

Engstrom focuses on monetary policy and financial market analysis. A model he built last year showed that the probability of a "soft landing"—where inflation falls back to around 2% while economic growth remains solid—had significantly declined by mid-2025, partly due to tariff uncertainty, raising the risk of "mild stagflation."

Joint Study: Supply Shocks and Fiscal Deficits Push Up Short and Long-Term Rates

In February, Covitz and Engstrom co-published a research paper exploring why U.S. long-term Treasury yields continued to rise even as the Fed lowered its benchmark short-term interest rate.

They argued that the rise in long-term rates was primarily driven by investors demanding higher risk compensation to account for possible adverse supply shocks—economic disruptions that push up prices and drag down growth—as well as the expanding federal fiscal deficit.

Their research also found no evidence that markets had lost confidence in the Fed's ability to maintain inflation near its 2% target.

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