(Bloomberg) -- The Federal Reserve needs to improve its execution of monetary policy and how it communicates with investors and the public if it is to protect its independence against ongoing political attacks, according to a think tank of former and current policymakers.
The report from the Group of 30 led by William Dudley, a former president of the New York Fed, addressed some proposals made by Fed chair nominee and fellow G-30 member Kevin Warsh, and made eight recommendations for what the Fed needs to do to shield itself from political attack.
The new analysis comes as Warsh has promised a sweeping shakeup of the central bank by shrinking its balance sheet, changing up its communications practices and floating a new inflation framework. Warsh, who has promised to resign his G-30 membership upon confirmation by the Senate, used the group to criticize the Fed in an April 2025 speech when he said the central bank needed a "strategic reset."
Warsh was nominated by President Donald Trump, who has leveled scathing criticisms at the Fed for not cutting interest rates fast enough and attempted to dismiss a Fed governor, while his Justice Department launched a criminal investigation into allegations of overspend on a building renovation project.
The G-30's suggested changes include publishing a clear road map for when and how the Fed uses its balance sheet, what the costs and benefits are, and the risks and upside associated with shrinking it. Other proposals include publishing detailed staff forecasts and limiting forward guidance to periods when interest rates are near zero.
The group urged the Fed to more clearly define the roles of the central bank and US Treasury, especially on balance sheet policies and financial stability tools. It also recommended an external review of the Fed's policy framework and operations.
The recommendations pushed back on one of Warsh's proposals, to rein in communication by Fed policymakers through speeches and other channels. The group made clear it doesn't believe the Fed chair has the authority to make this change, and that current communications are an important tool of transparency.
The report recommended that the Fed retains "the freedom of FOMC participants to communicate publicly about the economic outlook and the implications for monetary policy," even if it should also acknowledge "that the high frequency and volume of such speeches may, at times, be more confusing than illuminating."
G-30 members who worked on the report included Yi Gang, a former governor of the People's Bank of China, and Masaaki Shirakawa, a former governor of the Bank of Japan. Dudley is also a Bloomberg Opinion columnist.
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