The “brain” of the Federal Reserve’s five working groups

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On July 10, Federal Reserve Chair Kevin Wosch appointed more than a dozen external advisors to lead the newly established five major policy working groups. The five working groups will conduct research around communication mechanisms, balance sheet management, modernization of data collection, how productivity changes in the age of artificial intelligence, and the inflation policy framework, and will submit their results by the end of this year. This weekly report will briefly sort out the advisors’ identity backgrounds and past views for reference.

Core viewpoints

The heads of the five Fed policy working groups combine academic, policy, and industry backgrounds, and overall they are not a single “Wosch faction” with one consistent stance. There are also clear disagreements within some groups. Judging from the roster and their prior views, the working groups may lean toward weakening commitments to a deterministic interest-rate path; re-evaluating the size and structure of the balance sheet (even if balance-sheet reduction happens, it should “proceed more gradually”); introducing more timely, higher-granularity high-frequency data; and taking a relatively positive view of how AI can improve productivity. The roster raises the professional credibility of the reform, but whether the advice can be converted into policy ultimately may still depend on whether it can gain broad support within the FOMC.

Report summary

Who are the heads of the Fed’s five working groups?

A consolidated view is shown in Figure 1

(I) Communications group: fewer commitments to specific paths, more explanations of decision mechanisms

This working group mainly examines how the Fed conveys the process of policy discussions and the outcomes of decisions in an environment of uncertainty. The three heads are Peter R. Fisher, a practical professor at Foster School of Business, University of Washington; Arminio Fraga, former governor of the Central Bank of Brazil; and Mervyn King, former governor of the Bank of England.

Based on the existing views of the three, this combination as a whole tends to weaken long-term, precise interest-rate path commitments, instead emphasizing candid disclosure of the limits of forecasts and explaining to the public the policy framework, risk scenarios, and policy responses under different conditions. In other words, its potential reform direction may not simply be “less communication,” but rather “fewer commitments to specific paths, more explanations of decision mechanisms.”

(II) Balance sheet policy group: disagreement over the financial stability effects of expanding the balance sheet

This working group mainly reviews the costs, benefits, and institutional-level impacts of the Fed’s current balance sheet regime. The three heads are Karen Dynan, an economics professor at Harvard University; Raghuram Rajan, former governor of the Reserve Bank of India; and Jeremy Stein, a former Fed governor.

From the review, Rajan and Stein clearly differ in their views on the financial stability effects of a large-scale central bank balance sheet. Rajan emphasizes that while QE increases banks’ reserves, it may also induce banks to increase private liquidity commitments such as uninsured deposits and business credit lines, ultimately creating dependence on central bank liquidity; Stein, meanwhile, is inclined to support a “large balance sheet,” arguing that central banks providing reserves and other safe short-term assets can squeeze out private-sector short-term liabilities that can be redeemed, thereby reducing financial fragility.

However, the two are not completely opposed. Both believe that balance sheet policy changes the behavior of private financial institutions, so policy effects cannot be judged solely by total size. Rajan focuses more on the exit risk after liquidity dependence forms due to balance sheet expansion; Stein emphasizes preserving the financial stability function of the balance sheet and optimizing the maturity structure of assets.

(III) Data group: expanding from aggregate statistics to high-frequency, micro, and segmented data

This working group will improve the quality and timeliness of real-economy signals used to support the Fed’s policy judgments. The three heads are Raj Chetty, an economics professor at Harvard University; Doug McMillon, former president and CEO of Walmart; and Kevin Murphy, an economics professor at the University of Chicago.

Together, their backgrounds cover data methods, business practice, and economic interpretation. Chetty is skilled at using administrative records and big data from the private sector to build high-frequency, finely granular indicators; McMillon can identify real-time changes in consumption, prices, inventory, wages, and supply chains from the perspective of large retail companies; Murphy is strong in analyzing labor supply and demand, skill premiums, and technological change. This group may push the Fed to use high-frequency, micro, and segmented data more systematically, beyond traditional official aggregate statistics.

(IV) Productivity and employment group: strong industry participation, relatively optimistic long-term technology outlook

This working group will assess the impact of emerging general-purpose technologies represented by artificial intelligence on the economy, providing support for the Fed’s policy judgments. The three heads are Marc Andreessen, a Silicon Valley venture capitalist; Charles I. Jones, an economics professor at Stanford University, currently on leave from his position at Anthropic; and Asha Sharma, Microsoft’s executive vice president and Xbox CEO.

The staffing has a clear industry orientation: all three are directly involved in the development, investment, or commercialization applications of AI. Andreessen represents technology investing and technological optimism; although Jones is a macroeconomist studying long-term growth, he is currently employed by the AI company Anthropic; Sharma has experience in building AI platforms and operating large enterprises.

Overall, Andreessen is a technological optimist, while Jones also leans toward a “cautious in the short term, optimistic in the long term” stance.

(V) Inflation framework group: a strong academic lineup, likely placing more emphasis on the flexibility, credibility, and long-term perspective of the framework

This working group will re-examine how the Fed understands inflation drivers and its response strategies, and is composed of three scholars and policy thinkers with high influence in macroeconomics and monetary policy, including former chairman of the Council of Economic Advisers (CEA) Greg Mankiw, Thomas Sargent, an economics professor at New York University and a Nobel laureate, and William White, a senior research fellow at the C.D. Howe Institute and former BIS economic advisor.

From recent research, the three each question different links in the current inflation framework. Mankiw opposes understanding 2% as a 2.0% that must be achieved precisely, emphasizing the target range and policy uncertainty; Sargent focuses on whether the average inflation targeting regime can be implemented consistently before and after, and whether such a制度 has credibility; White argues that focusing only on near-term consumer price stability is not enough—the policy framework should also incorporate the credit cycle, debt, and the financial cycle.

II. How does the market look?

Based on current publicly available institutional views, the market’s preliminary evaluation of the roster of leaders is generally positive. The roster includes well-known scholars, former central bank heads, policy officials, and industry figures; some working groups also include members with differing views, reducing external concerns that the reforms lack professionalism or are overly politicized. However, personnel quality does not equal reforms necessarily taking root. The working groups’ agendas, how they participate within the FOMC, and the mechanism by which their recommendations enter formal decision-making remain unclear.

Main text of the report

Who are the heads of the Fed’s five working groups?

(I) Communications group: fewer commitments to specific paths, more explanations of decision mechanisms

This working group mainly examines how the Fed conveys the process of policy discussions and the outcomes of decisions in an environment of uncertainty. The three heads are Peter R. Fisher, a practical professor at Foster School of Business, University of Washington; Arminio Fraga, former governor of the Central Bank of Brazil; and Mervyn King, former governor of the Bank of England.

Based on the existing views of the three, this combination as a whole tends to weaken long-term, precise interest-rate path commitments, instead emphasizing candid disclosure of the limits of forecasts and explaining to the public the policy framework, risk scenarios, and policy responses under different conditions. In other words, its potential reform direction may not simply be “less communication,” but rather “fewer commitments to specific paths, more explanations of decision mechanisms.”

1、Peter R. Fisher: questioning long-term, precise forward guidance and the dot plot

Background: Fisher previously oversaw open market operations at the New York Fed, and later served as Deputy Under Secretary for Domestic Finance at the U.S. Treasury and as the head of BlackRock’s fixed income business. Compared with the other heads in this working group, he also has experience in managing the New York Fed’s SOMA, executing domestic financial policy at the Treasury, and fixed income investment management at BlackRock—forming a tri-sector background of “fiscal—monetary—buy-side,” meaning his policy observations and communication perspective may be closer to how markets operate.

Views: From his past speeches, Fisher advocates for central banks to communicate candidly about uncertainty in economic and policy prospects, and opposes relying excessively on certain interest-rate path guidance and dot-plot-style precise signaling. He emphasizes explaining more about the policy reaction function and the conditions under which judgment changes.

1） In a March 2017 speech at Grant’s Interest Rate Observer Spring Meeting, Fisher explicitly criticized “bad habits” formed by forward guidance and excessive communication, arguing that central banks can only regain credibility by facing policy uncertainty candidly. He believes acknowledging alternative outcomes and uncertainty is a better way to express the reaction function than providing a certain path. His logic is that the central bank is not dealing with a linear world that can be precisely predicted; policymakers must openly acknowledge that their prior assumptions may be wrong and explain under what conditions new evidence would lead them to revise their judgments. Rather than publishing a seemingly precise long-term interest-rate path, he argues for explaining alternative scenarios, risks, and how the response would differ across scenarios.

2） In a 2016 speech at the Shadow Open Market Committee titled《What’s the Matter with the Fed？》, Fisher criticized that the Fed’s decision-making and communication system had formed a “false consensus,” undermining accountability. FOMC statements often come close to being approved unanimously, but each member anonymously submits interest-rate forecast points (the dot plot), and expresses differing views in speeches outside the meeting. Ultimately, only the chair is truly responsible for the policy outcomes.

2、Arminio Fraga: specify policy objectives, explain the framework and the inflation reversion path

Background: Fraga’s career spans central banking, academia, and international financial markets, and he is especially skilled in inflation governance and policy communication in emerging economies. Earlier in his career, he served as the head of international affairs at the Central Bank of Brazil, and later became a Managing Director at Soros Fund Management in New York from 1993 to 1999. From 1999 to 2002, he served as governor of the Central Bank of Brazil, pushing the implementation of a floating exchange rate regime and an inflation targeting system. During multiple external shocks (such as Argentina’s debt default and Brazil’s 2001 hydropower crisis), he focused on restoring policy credibility. In 2003, he founded the asset management firm Gávea Investimentos. He also served as chairman of BM&F Bovespa, Brazil’s securities and derivatives exchange, and was a member of the “Group of 30” and the Council on Foreign Relations (CFR) in the United States.

Views: Fraga tends to reduce mechanical commitments to interest-rate paths and strengthen explanations of the policy reaction function, supply shocks, and the time horizon for the reversion to the target. He believes policy objectives should be clearly established to stabilize, but the timeframe for achieving the objectives should be adjusted flexibly according to the nature of shocks, and the central bank must fully explain such adjustments.

1） In an oral history compiled by the Central Bank of Brazil (2018), Fraga recalled Brazil’s experience in 1999 shifting from an exchange-rate anchor to a floating exchange rate regime and inflation targeting. He particularly emphasized that at the time it was necessary to explain to the public extremely carefully how the new framework would operate, because the effectiveness of policy highly depends on credibility. In practice, under his leadership, the Central Bank of Brazil strengthened several communication tools: publishing clear inflation targets; issuing quarterly “Inflation Reports” and the central bank’s forecasts; promptly releasing minutes of meetings of the monetary policy committee; when the target was not met, explaining the reasons, response measures, and the timeframe for reversion; and explaining the new policy framework through media and market communication.

2） In 2003, a paper co-authored by Fraga titled《Inflation Targeting in Emerging Market Economies》 emphasized that when facing significant supply shocks, a transparent policy procedure that can be explained externally should be established, and communication is an important component of building central bank credibility.

3、Mervyn King: acknowledge fundamental uncertainty, advocate scenario narratives and robust decision-making

Background: King entered the Bank of England in 1991, serving as chief economist and deputy governor. From 2003 to 2013, he was governor of the Bank of England and chairman of the Monetary Policy Committee, overseeing the period of the 2008 global financial crisis and subsequent quantitative easing. After stepping down, he became a professor of economics and law at New York University. His research and writing focus on monetary policy, the banking system, financial crises, and “radical uncertainty.” Representative works include《The End of Alchemy》and《Radical Uncertainty》.

Views: King questions precise forecasting and deterministic forward guidance. He argues that central banks should candidly disclose fundamental uncertainty, replacing single-path commitments with risk scenarios, economic narratives, and conditional reaction functions.

His core viewpoints mainly include: 1） opposing wrapping forward guidance into deterministic interest-rate commitments. Central banks should not pretend to know future interest-rate paths. 2） central banks should openly acknowledge the limits of their forecasting ability. He believes many important risks cannot be captured by stable probability distributions, and historical data and models may not apply after structural changes in the economy. 3） supplement model forecasts with “explainable economic narratives.” King proposes that in an uncertain environment, the policy framework should be composed of three elements: clearly and transparently explaining how the economic structure is changing; building mechanisms that allow the dominant narrative to be questioned and revised; and adopting robust policy rules capable of handling multiple unexpected scenarios.

(II) Balance sheet policy group: disagreement over the financial stability effects of expanding the balance sheet

This working group** mainly reviews the costs, benefits, and institutional-level impacts of the Fed’s current balance sheet regime**. The three heads are Karen Dynan, an economics professor at Harvard University; Raghuram Rajan, former governor of the Reserve Bank of India; and Jeremy Stein, a former Fed governor.

From the review, Rajan and Stein clearly differ in their views on the financial stability effects of a large-scale central bank balance sheet. Rajan emphasizes that while QE increases banks’ reserves, it may also induce banks to increase private liquidity commitments such as uninsured deposits and business credit lines, ultimately creating dependence on central bank liquidity; Stein argues that central banks providing safe short-term assets such as reserves can squeeze out private-sector short-term liabilities that can be redeemed, thereby reducing financial fragility.

However, the two are not completely opposed. Both believe that balance sheet policy changes the behavior of private financial institutions, so policy effects cannot be judged solely by total size. Rajan focuses more on warning about exit risks after liquidity dependence forms due to balance sheet expansion; Stein emphasizes preserving the financial stability function of the balance sheet and optimizing the maturity structure of assets.

1、Karen Dynan: assess the effects of expanding and shrinking from household, housing, and aggregate demand perspectives

Background: Dynan worked at the Fed Board of Governors for about 17 years, holding roles including head of household and real estate finance in research and statistics, assistant director, and senior adviser. From 2009 to 2013, she served as vice chair and co-director of the Economic Research Program at the Brookings Institution. From 2014 to 2017, she served as Assistant Secretary for Economic Policy and Chief Economist at the U.S. Treasury. Her research mainly involves fiscal and monetary policy, household consumption and balance sheets, real estate finance, and economic statistics.

Views: Dynan did not put forward a clear systemic position on the balance sheet’s size and the reserves regime. With her research background, in the working group she may focus more on macroeconomic demand, real-economy transmission, and data assessment.

2、Raghuram Rajan: use QE prudently, face up to the asymmetric risks of QT

Background: Rajan was IMF Chief Economist and Director of the Research Department from 2003 to 2006, and Governor of the Reserve Bank of India from 2013 to 2016. From 2015 to 2016, he also served as Deputy Chairman of the BIS. Rajan has long studied banking, corporate finance, monetary policy, and financial stability.

Views: Rajan believes that QE will encourage banks to increase liquidity commitments that can be redeemed on demand, such as checking deposits, uninsured deposits, and business credit lines. These liquidity withdrawal rights will not shrink in parallel with reserves during QT, causing the financial system to gradually depend on central bank liquidity, creating a “easier to expand, harder to shrink” ratchet effect. Therefore, central banks should use QE more cautiously and in a limited manner, and during decisions to reduce the balance sheet they should fully consider bank liability structures, contingent liquidity commitments, and financial stability risks.

1）QE should be more restrained. ①QE may increase rather than reduce future liquidity pressures. Rajan argues that while expanding the balance sheet increases banks’ reserves on the asset side, it also encourages banks to increase demand deposits—especially uninsured demand deposits—and to provide more credit lines to businesses. As a result, the private sector’s liquidity withdrawal rights tied to banks expand alongside reserves. Therefore, more ample reserves do not necessarily improve net system liquidity proportionally; instead, they may accumulate new liquidity risks. ②A large amount of reserves may not flow smoothly to stressed institutions during a crisis. Even if total reserves in the banking system are sufficient, the reserves may be concentrated in a few institutions. During a crisis, banks with abundant liquidity may hoard reserves rather than provide them to stressed institutions due to risk considerations, regulatory constraints, or self-protection motives—leading to localized liquidity tightness.

2）But he does not advocate rapid, aggressive QT. Rajan believes that since the financial system has already formed liquidity dependence during QE, QT may carry larger financial stability risks than QE, and therefore cannot be viewed as a simple reversal of QE. After a central bank stops QE and shifts to QT, bank reserves decline accordingly, but the demand deposits, uninsured deposits, and business credit lines formed earlier do not contract in sync. The whole mechanism can be summarized as: QE increases reserves and induces more liquidity withdrawal rights—QT withdraws reserves but the related withdrawal rights do not fall in parallel—liquidity stress rises in the financial system—forcing the central bank to provide liquidity again.

3、Jeremy Stein: no need for mechanical QT; structural adjustments may matter more than shrinking the overall size

Background: Stein previously taught at Harvard Business School and the Sloan School of Management at MIT. He joined the economics department at Harvard in 2000. In 2009, he served as a senior adviser to the Secretary of the Treasury and as a member of the National Economic Council in the Obama administration. From 2012 to 2014, he served as a Fed governor. Stein’s research spans corporate finance, banking, monetary policy, and financial regulation, with particular focus on financial intermediaries, short-term funding, risk-taking, and the link between monetary policy and financial stability. He served as president of the American Finance Association and has been a research fellow for the National Bureau of Economic Research.

Views: Overall, Stein supports a “large balance sheet.” He believes that a Fed balance sheet of an appropriate size can provide public safe short-term assets, reducing private-sector incentives to issue redeemable short-term liabilities, and therefore has value for financial stability. Policy emphasis should not be only achieving a smaller balance sheet, but optimizing reserves supply and the maturity structure of assets.

1）Emphasize the financial stability benefits of supplying large volumes of safe assets. A large Fed balance sheet is not only a monetary policy tool during quantitative easing; in normal interest-rate environments it can also, by providing safe, short-term, quasi-monetary assets, restrain private financial intermediaries from excessive maturity transformation (meaning private financial institutions issuing short-term liabilities that can be redeemed to finance long-term or risky assets), thereby reducing financial system fragility.

2）Recent views place more emphasis on asset structure than on total size. In 2026, Stein further stated that rather than simply compressing the total amount of assets, it may be more important to gradually shift the Fed’s assets from long-term securities toward short-term U.S. Treasury bills.

(III) Data group: expanding from aggregate statistics to high-frequency, micro, and segmented data

This working group will** improve the quality and timeliness of real-economy signals used to support the Fed’s policy judgments.** The three heads are Raj Chetty, an economics professor at Harvard University; Doug McMillon, former president and CEO of Walmart; and Kevin Murphy, an economics professor at the University of Chicago.

The trio’s backgrounds cover data methods, business practice, and economic interpretation. Chetty is skilled at using administrative records and big data from the private sector to build high-frequency, finely granular indicators; McMillon can identify real-time changes in consumption, prices, inventory, wages, and supply chains from the perspective of large retail companies; Murphy is strong in analyzing labor supply and demand, skill premiums, and technological change. This group may push the Fed to use high-frequency, micro, and segmented data more systematically beyond traditional official aggregate statistics.

1、Raj Chetty: expert in micro big data and real-time economic tracking

Raj Chetty is the William A. Ackman Professor of Economics at Harvard University, and also serves as the Director of Opportunity Insights. Opportunity Insights uses big data to study the science of economic opportunity, focusing on how to give children from different backgrounds better chances of success. He has long used tax records, administrative data, and big data from the private sector to study intergenerational mobility, employment, education, housing, and economic opportunities. During the pandemic, he and his team used anonymized data from credit card processors, payroll service providers, recruiting platforms, and financial services companies to build a real-time economic tracking platform, observing indicators such as consumption, employment, income, company revenues, and hiring. The data typically lag by about three days and can be broken down by county, industry, income groups, and company size.

2、Doug McMillon: former Walmart president and CEO

Doug McMillon joined Walmart as an hourly worker in 1984, and served as Walmart’s president and CEO from February 2014 to January 2026. During his tenure, he promoted e-commerce, technology, supply chain, and omnichannel retail transformation.

3、Kevin Murphy: a representative scholar of research on labor supply and demand, skill premiums, and human capital

Kevin Murphy is an important representative of labor economics in the Chicago School. He has long used micro data and supply-and-demand frameworks to study wage inequality, skill premiums, unemployment, human capital, and economic growth. He is a representative scholar in research on skill demand, wage inequality, and college wage premiums. His and Katz’s classic study《Changes in Relative Wages, 1963–1987: Supply and Demand Factors》（1992, QJE）laid an important foundation for using labor supply-and-demand frameworks to explain changes in skill premiums.

(IV) Productivity and employment group: strong industry participation, with a relatively optimistic long-term technology outlook

This working group will** assess the impact of emerging general-purpose technologies represented by artificial intelligence on the economy, providing support for the Fed’s policy judgments.** The three heads are Marc Andreessen, a Silicon Valley venture capitalist; Charles I. Jones, an economics professor at Stanford University, currently on leave and employed at Anthropic; and Asha Sharma, Microsoft’s executive vice president and Xbox CEO.

The staffing has a clear industry orientation: all three are directly involved in the development, investment, or commercialization applications of AI. Andreessen represents technology investing and technological optimism; Jones, although a macroeconomist who studies long-term growth, is currently employed at the AI company Anthropic; Sharma has experience in building AI platforms and operating large enterprises.

1、Marc Andreessen: a representative Silicon Valley VC of technological optimism

Background: Andreessen is an American tech entrepreneur and venture capitalist, currently a co-founder and general partner of the Silicon Valley venture capital firm Andreessen Horowitz (a16z). While in university, he participated in developing early mainstream web browser Mosaic, and later co-founded Netscape, becoming a representative figure of the wave of internet commercialization. After that, he founded a cloud computing and software company Loudcloud, later renamed Opsware and sold it to Hewlett-Packard. In 2009, together with Ben Horowitz, he founded a16z, and has long invested in software, internet, cryptocurrency, and artificial intelligence companies.

Views: Andreessen is a clear technological optimist. He believes technology increases labor productivity and in the long run will increase wages, create new industries and new jobs rather than permanently reducing employment. His policy inclination toward AI development is to accelerate rather than restrict. He is also a public supporter of the second Trump administration.

2、Charles I. Jones: constrained in the short term by “weak links,” but AI could significantly accelerate growth in the long run

Background: Jones is a professor of economics at Stanford University’s business school, and his research focuses on long-term economic growth, productivity, innovation, and technological progress. He is currently temporarily away from Stanford and** works at the AI company Anthropic**.

Views: Jones’s assessment of AI’s economic impact is “cautious in the short term, optimistic in the long term.” In the short run, AI mainly automates parts of tasks, and productivity gains are still constrained by human decision-making, organizational adjustments, and physical-world “weak links.” The employment impact is also more likely to show up as task reconfiguration and occupational differentiation. In the long run, if AI gradually covers R&D and most cognitive and physical tasks, automation and innovation could form a positive feedback loop, pushing productivity—and thus economic growth rates—significantly higher.

1）AI automation could potentially significantly accelerate economic growth. Although the growth rate of U.S. real GDP per capita has been roughly stable at about 2% per year over the past 150 years, if AI ultimately automates most human tasks, the growth rate could rise significantly, even exceeding 5% per year.

2）But productivity leaps may occur slower than technology optimists expect. Economic production consists of many complementary tasks; overall output is often constrained by the slowest and most difficult-to-automate parts (weak links). Therefore, the macro benefits of AI may be relatively moderate over the next one or two decades, and growth may only accelerate significantly after most of the key links are automated.

3）AI replaces tasks, not necessarily entire occupations immediately. An occupation is a bundle of different tasks. If AI automates some of them, it may increase workers’ efficiency in completing the remaining tasks, thereby increasing productivity and wages. Only when an occupation contains the vast majority of tasks that can be performed by machines at low cost does that occupation face full replacement. Therefore, he does not agree with the simple inference that “AI progress will inevitably lead to large-scale unemployment soon.”

4）Long-term risks are more reflected in occupational transitions and income distribution. Some workers’ wages and employment may still be affected, and the share of labor income in GDP may decline. Even if AI greatly increases the overall size of the economy, the gains may not naturally be distributed evenly; they could ultimately turn into problems of wealth concentration, occupational transitions, and redistribution.

3、Asha Sharma: technology executive focusing on scaling AI deployment and converting it into productivity gains

Background: She is currently Microsoft’s executive vice president and CEO of Xbox. She is a corporate executive spanning AI platform product, internet business operations, and retail technology. She previously served as the head of Microsoft’s CoreAI product, coordinating core AI platforms such as Azure AI Foundry, Azure OpenAI Service, and tools for agent development. Before that, she served as Chief Operating Officer at Instacart, where the company completed its IPO during her tenure. She previously also served as product vice president at Meta, responsible for products such as Messenger and Instagram Direct. She currently also serves on the boards of Home Depot and Coupang. She graduated from the Carlson School of Management at the University of Minnesota. From a macro research perspective, she mainly represents a frontline practice view of enterprise AI scaled deployment and productivity conversion.

Views: Sharma has not yet publicly laid out a systematic discussion of AI’s impact on macro productivity and employment. Based on her experience building AI platforms and operating enterprises, she is more likely to provide firsthand experience on scaling AI deployments, workflow redesign, and productivity conversion within the working group. Her public statements emphasize the combination of technology and human creativity, but that is not enough to judge her overall stance on AI substituting jobs.

(V) Inflation framework group: a strong academic lineup; may place more emphasis on the flexibility, credibility, and long-term perspective of the framework

This working group will** re-examine how the Fed understands inflation drivers and response strategies. It consists of three scholars and policy ideologues with high influence in macroeconomics and monetary policy, including** Greg Mankiw, former chairman of the Council of Economic Advisers; Thomas Sargent, an economics professor at New York University and a Nobel laureate; and William White, a former BIS economic advisor and a senior research fellow at the C.D. Howe Institute.

From recent research, the three each question different parts of the current inflation framework. Mankiw opposes interpreting 2% as a 2.0% that must be achieved precisely, emphasizing the target range and policy uncertainty; Sargent focuses on whether an average inflation targeting regime can be implemented consistently before and after, and whether the制度 has credibility; White argues that focusing only on near-term consumer price stability is insufficient, and the policy framework should include credit, debt, and the financial cycle.

1、Greg Mankiw: a New Keynesian macroeconomist emphasizing price stickiness and shock identification

Background: He is currently the Robert M. Beren Professor of Economics at Harvard University, and is an important representative of New Keynesian economics. He served as chairman of the U.S. Council of Economic Advisers from 2003 to 2005. His books《Macroeconomics》and《Principles of Economics》are widely used economics textbooks worldwide.

Views: Mankiw belongs to the New Keynesian framework, emphasizing price stickiness, highlighting differences across shocks, distinguishing demand-driven and supply-driven inflation, and discussing the trade-offs monetary policy faces under different shocks. In recent years, Mankiw has offered the most direct criticism of the mechanical pursuit of 2.0%, arguing that central banks should avoid overly precise inflation targets. Compared with “2.0%,” a broader “2%” or target range better fits the uncertainty in policymakers’ ability to control policy. Macroeconomics needs to retain core theoretical frameworks like the Phillips curve, but it must also acknowledge limitations of these tools in real forecasting and policy operations. It requires renewed focus on the money supply while reducing blind faith in a single model and precise targets.

2、Thomas Sargent: an important foundation for theories of rational expectations and policy credibility

Background: Thomas J. Sargent is currently a professor of economics and business at New York University’s William R. Berkley, and also serves as a senior fellow at Stanford University’s Hoover Institution. He has taught at the University of Minnesota, University of Chicago, and Stanford University. He is a key founder of rational expectations macroeconomics. In 2011, he won the Nobel Prize in Economic Sciences with Christopher Sims for research on the causal relationship between policy and economic outcomes in macroeconomics.

Views: Sargent emphasizes rational expectations and the credibility of policy institutions. The public will adjust their behavior based on the complete future fiscal—monetary policy arrangement; governing inflation cannot rely only on temporary rate hikes. Instead, credible and sustainable policy institutional changes are needed; if the fiscal path does not cooperate, the long-term effectiveness of monetary tightening may also be weakened.

3、William White: policy should not focus only on price stability; it should incorporate the financial cycle

Background: William R. White is a Canadian economist. He worked at the Bank of England early in his career, then worked at the Bank of Canada for 22 years, serving as deputy governor of the Bank of Canada in 1988. In 1994 he joined the Bank for International Settlements (BIS). From 1995 to 2008, he served as BIS economic advisor and head of the Monetary and Economic Department. After that, he long served as chairman of the OECD Economics and Development Review Committee. White has long studied monetary policy, credit expansion, debt accumulation, and the financial cycle, and is known for an early warning that loose monetary policy may trigger asset bubbles and financial imbalances.

Views: White has long criticized traditional monetary policy frameworks for focusing too much on near-term consumer price inflation and short-term output stability, while paying insufficient attention to credit expansion, debt accumulation, asset prices, and the financial cycle.

1）Low inflation does not mean financial risks have not been accumulating. In《Is Price Stability Enough?》, White clearly points out that historically many serious financial crises occurred without obvious inflation pressure beforehand, so consumer price stability alone is not enough to ensure macro stability.

2）Focus on credit, debt, asset prices, and the financial cycle. White believes the financial boom-bust cycle may be driven by reinforcing interactions between credit and asset prices. Central banks cannot wait until financial imbalances break and then “clean up”; they should pay attention to early accumulation of risk. A paper he published in 2023 explicitly argues that central banks should shift from being “controllers of short-term inflation” to “guardians of the financial cycle and systemic stability,” paying more attention to credit and debt growth.

II. How does the market look?

Based on current publicly available institutional views, the market’s preliminary evaluation of the roster of leaders is generally positive. The roster includes well-known scholars, former central bank heads, policy officials, and industry figures; some working groups also include members with differing views, reducing external concerns that the reforms lack professionalism or are overly politicized. However, personnel quality does not equal reforms necessarily taking root. The working groups’ agendas, how they participate within the FOMC, and the mechanism by which their recommendations enter formal decision-making remain unclear.

First, the roster enhances the professional credibility of the reform, but it does not bypass FOMC internal consensus constraints. 1）Krishna Guha of Evercore ISI assessed it as a “serious and broadly balanced” combination, arguing that markets, Fed staff, and the FOMC will take it seriously, making it a good starting point for Warsh’s reform push; however, major institutional changes typically require near-unanimous support within the FOMC, and sitting members will not simply accept everything. 2）Neil Dutta of Renaissance Macro also believes that this batch of “serious and well-respected professionals” can help improve Warsh’s credibility among peers, but some members do indeed tend to share Warsh’s doubts about a large balance sheet and excessive forward guidance.

Second, having external experts lead is an obvious procedural innovation, but whether research outcomes can be converted into policy still depends on the FOMC. Michael Feroli, JPMorgan’s chief U.S. economist, suggested that the working groups could help drive “institutional changes,” or they may just revisit existing issues such as communication, balance sheet policy, and the inflation framework. Previously, Fed communication reforms also stalled due to internal disagreements.

From historical comparison, the framework review this time has clearly changed in terms of organization. In 2012, the Fed officially set the 2% long-term inflation target, driven mainly by an internal communications working group within the FOMC. The two rounds of framework assessment in 2019—2020 and 2025 adopted a model of “organizing within the Fed system and making FOMC decisions, while also absorbing public and external academic input,” and both included Fed Listens public activities, academic research conferences, Fed staff analyses, and internal FOMC discussions. By contrast, this time Warsh has assigned the five working groups to be jointly led by external experts, with Fed staff providing support, and requiring them to operate independently, follow evidence, and provide candid feedback.

This article source: “One Yu Zhong”

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