The US Federal Reserve on Thursday announced the names of the leaders of five task forces. These task forces will review how the Central Bank implements monetary policy. Those selected include Indian-origin economists Raghuram Rajan and Raj Chetty, and Microsoft executive Asha Sharma, who will lead three panels. Fed Chairman Kevin Worsh had announced this initiative in his first press conference after assuming office on June 17.
Warsh said in a statement that the Federal Reserve’s commitment to price stability and maximum employment is unwavering. At the same time, we are also committed to fulfilling our mandate with full seriousness. He further said that I am proud that the best experts from different fields have agreed to work with us to improve our functioning as an organization. The objective is clear: to ensure that the Fed is in the best position to achieve its goals at this critical time.
The Fed said that each task force will be led by experts from academia, business and central banking, who will be supported by the Federal Reserve staff. These panels will work independently and provide evidence-based recommendations to the Federal Open Market Committee (FOMC). Warsh expects this review to be completed by the end of the year.
What will Raghuram Rajan do?
Former Reserve Bank of India Governor Raghuram Rajan will work in the ‘Balance Sheet Policy’ task force along with Harvard economist Karen Dinon and former Federal Reserve Governor Jeremy Stein.
The panel will examine the costs, benefits, and institutional effects of the Federal Reserve’s current balance sheet arrangements, including their role in asset holdings and monetary policy enforcement. Warsh has previously said that the Fed’s balance sheet, which is currently worth about $6.7 trillion, should be reduced.
Rajan is currently a professor of finance at the University of Chicago Booth School of Business. As RBI Governor between 2013 and 2016, he helped India deal with the “taper tantrum”, strengthened the banking system and played a key role in setting up the country’s inflation-targeting framework.
What will Raj Chetty do?
Harvard University economist Raj Chetty will lead the ‘data’ task force along with former Walmart CEO Doug McMillan and University of Chicago economist Kevin Murphy. This group will focus on improving the quality and timely availability of real-world economic signals that inform the Federal Reserve’s policy decisions. Chetty is known for using large administrative and real-time datasets to study economic mobility, inequality, and the labor market in the United States.
What will Asha Sharma do?
Microsoft Executive Vice President Asha Sharma will work on the Productivity and Jobs Task Force along with venture capitalist Marc Andreessen and Stanford economist Charles I. Jones. The panel will assess the economic impact of emerging general-purpose technologies such as artificial intelligence on productivity, employment and economic growth. The results are expected to help the Federal Reserve better understand how advances in AI and other technologies could impact the labor market and shape future monetary policy decisions.
second task force
The remaining two task forces will focus on important aspects of the Federal Reserve’s policy framework. The Communications Task Force, led by Peter Fischer, Arminio Fraga and former Bank of England governor Mervyn King, will review how the Fed communicates its policy discussions and decisions during times of uncertainty.
The Inflation Framework Task Force, led by Harvard economist Greg Mankiw, Nobel laureate Thomas Sargent and former Bank for International Settlements adviser William White, will relook at how the central bank understands and responds to the causes of inflation. It is expected that this task force will submit its recommendations to the Federal Open Market Committee (FOMC) by the end of this year.
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