Waller's proposal to reduce the number of FOMC meetings has sparked heated discussions. Analysts suggest that market volatility may intensify, but trading opportunities will also increase.

Federal Reserve Chair Waller is considering reducing the number of policy meetings held by the Federal Open Market Committee (FOMC) each year, as part of a significant initiative to diminish the Fed's direct impact on financial markets and reshape its policy communication framework. Market participants believe that while this move may increase volatility in the stock and bond markets, it could also create more trading opportunities for investors. Since taking office as Fed Chair in May, Waller has introduced a series of reforms aimed at gradually shifting the Fed's highly transparent communication approach, which has characterized the past several decades. Under his leadership, the Fed has markedly reduced forward guidance, no longer proactively signaling the future path of interest rates; the post-meeting policy statements have been significantly shortened; and in two recent press conferences, Waller's responses regarding future policy direction have been more cautious and ambiguous than in the past. Now, Waller has suggested exploring the possibility of reducing the frequency of regular FOMC meetings. Currently, the Fed holds eight meetings a year, a practice that has been in place since the early 1980s during the tenure of former Chair Paul Volcker. According to previous media reports, Waller raised this idea during last week's FOMC meeting; however, insiders have indicated that it remains largely in the discussion phase and has not been formalized into a concrete plan. Market participants believe that if the Fed were to decrease the number of policy meetings, it would further lower the frequency of policy communication, increasing uncertainty about the direction of policy. George Catrambone, head of Americas fixed income at DWS Group, stated, "There is no doubt this will raise market volatility. A decrease in transparency means market participants will need to hedge more, and it also means that more dispersed market expectations may arise." However, some officials argue that the number of meetings does not have a fixed standard. Minneapolis Fed President Neel Kashkari expressed that whether the FOMC meets eight times, six times, or ten times a year, there is no "magic number." He pointed out that the Fed always retains the ability to hold emergency meetings, but since these meetings send a special signal to the market, they should be used sparingly. Philadelphia Fed President Patrick Harker also mentioned the necessity of having thorough discussions regarding the frequency of meetings. Bill English, a former head of monetary affairs at the Fed and now a professor at Yale University, believes there is no absolute standard for the number of meetings. He stated that while holding more meetings does come with costs, holding too few meetings may lead to delays in policy adjustments. English revealed that he had suggested the Fed hold six meetings a year, with a press conference at each meeting, while also simultaneously releasing the Summary of Economic Projections (SEP). However, he believes that the current schedule of eight meetings per year is "already very close to a reasonable level," and is more concerned about Waller's ongoing reduction of policy communication. "I don't like reducing communication," English stated. "Explaining the reasons behind policy decisions helps the public understand and anticipate policy changes, enhances the effectiveness of monetary policy, and reflects the transparency and accountability that the Fed should have." Despite Waller's continuous push for reform, the market's response has been relatively calm. Since Waller took over from Powell as Fed Chair on May 22, the Dow Jones Industrial Average has risen by about 3,500 points, an increase of approximately 7%; during the same period, the yields on U.S. two-year and ten-year Treasury notes have both risen by about eight basis points, with overall volatility remaining moderate. Meanwhile, Waller has also established five special working groups to conduct comprehensive evaluations of various areas, including the monetary policy framework, communication strategy, data usage, and balance sheet, with the aim of driving systemic reform at the Fed. Mark Hackett, chief market strategist at Nationwide, stated, "Waller seems to have successfully pushed for this reform. He is the first chair I've seen who clearly indicates a desire for the Fed to reduce its direct impact on the markets." Waller has previously stated that market participants should base their investment decisions on economic data rather than on comments from Fed officials. "Market participants are learning to focus on the game itself, rather than the referee," Waller said at last week's press conference. "Market prices will reflect changes freely according to their own judgments. I think this is a positive change, and this is just the beginning." However, some investment institutions are concerned that the new policy framework may lead to a prolonged period of market repricing. Dario Perkins, global macroeconomic head at TS Lombard, believes that Waller's new communication model indicates that the market will enter a new phase of "continuous repricing." He stated that investors must gradually adapt to a new situation where, before the FOMC meetings, the market will not be able to predict outcomes as accurately as before. "This means volatility will rise, but at the same time, it will create new trading opportunities," Perkins stated. "This is likely the result that Waller hopes to see." Market participants are also worried that with reduced forward guidance and the decreasing significance of the dot plot, combined with fewer meeting occurrences, it will be increasingly challenging to gauge the Fed's policy direction. Waller has previously criticized the dot plot and chose not to submit his own interest rate forecast during the update of the dot plot at the FOMC in June. Hackett believes that if the Fed not only reduces forward guidance but also further decreases the frequency of meetings, the impact on the market will be even more pronounced. "If its just adjustments to the dot plot or changing forward guidance, I dont see it as a big issue; but if the number of meetings is reduced, that represents a change on another level, and the market may perceive it as disruptive." Komal Sri-Kumar, president of Sri-Kumar Global Strategies, believes that reducing the number of meetings could lead to long-term Treasury yields rising faster than short-term yields, a phenomenon known as "bear steepening." This means that bond investors may worry that while the Fed keeps short-term rates unchanged, it may push long-term inflation expectations higher. He stated, "Bond investors dont need to be led by the hand; what they really hope for is not to create more uncertainty artificially." Analysts pointed out that the U.S. government currently faces significant debt financing pressures. To date, the amount of publicly held U.S. debt has reached $31.1 trillion, and the Treasury Department estimates that this year's interest expenditure on this debt alone will be about $1.3 trillion, second only to Social Security expenditures. U.S. Treasury Secretary Janet Yellen recently referred to Waller's reforms as a "detox treatment" for the market, believing that the market needs to gradually move away from dependence on the Fed's forward guidance. As for whether Waller's reforms will be successful, there remains considerable division within the market. Investors are largely focused on the Jackson Hole Global Central Bank Annual Meeting at the end of August, where it is anticipated that Waller may further elaborate on his reform ideas and future policy communication framework.