Warsh Wants the Fed to Send Fewer Signals. That Comes With Risks.

Financial markets wasted little time on Wednesday filling a void left by Kevin M.Warsh during his first news conference as chairman of the Federal Reserve.Mr.

Warsh kept his views on the path for interest rates closely held during the 42-minute exchange with reporters, providing little steer in either direction about what might happen to monetary policy in the coming months.As if to drive home the point, he declined to submit economic projections as part of a quarterly release the Fed publishes.

The policy statement was also significantly scaled back.Investors — cuing from the new set of projections, which showed a groundswell of support for rate increases this year — quickly piled on bets for higher borrowing costs.The yield on two-year US Treasury bonds, which are highly sensitive to changes in the Fed’s stance, leaped higher to roughly 4.2 percent.

Markets tracking federal funds futures also moved sharply, indicating elevated odds of a September move and one fully priced in by October.Mr.Warsh’s approach has the benefit of carving out significant flexibility for the Fed in terms of what it does next.

But it also raises the risk that the Fed chairman will not have as firm a grip on the narrative that takes hold about either the trajectory of the economy or the central bank’s policy response.That in turn could create greater scope for some kind of misunderstanding that then needs to be resolved, leading to greater volatility in the markets that directly influence mortgage rates and those for other types of borrowing.“By not saying anything, you are basically leaving a lot more in the hands of the market,” said Marc Giannoni, chief U.S.

economist for Barclays.“Ultimately, he might grow frustrated with what the market is thinking about the future.”The genesis of Mr.

Warsh’s view, which will be examined in greater depth as one of five task forces that he announced on Wednesday, stems from his longstanding view that Fed officials should be mor...