# Rethinking Fed Operations: Recommendations to the Five Task Forces.

1 Opinion August 11, 2026By Kim Schoenholtz and Stephen Cecchetti

Brookings Institution ![Kim Schoenholtz](/sites/default/files/styles/246w/public/assets/images/con_033448.jpg?itok=-Wg03fdj)Federal Reserve Chair Kevin Warsh has appointed five task forces to reconsider how the Fed operates: inflation frameworks, data, productivity and jobs, communications, and balance sheet policy. Together they amount to the most consequential review of U.S. monetary policy at least since the Federal Open Market Committee (FOMC) adopted a formal inflation target in 2012. The review is overdue. Five years of above-target inflation are eroding the credibility the Fed spent decades building.

The five assignments look separate, but a common problem runs through all of them. In each area, the FOMC has to steer by something nobody actually observes. No one measures the inflation trend directly; analysts must filter it out of noisy data. The statistical agencies typically infer real economic quantities rather than collect them. This practice blurs the co-movement of prices and output that identifies the drivers of inflation. Economists estimate potential output (y\*), the neutral interest rate (r\*), and the natural rate of unemployment (u\*), collectively the “stars,” from models fit to history, but no one knows the true values. And even outside the Fed, observers must reverse-engineer how the FOMC responds to incoming information – its reaction function.

Reliance on history and stylized models makes all of these estimates fragile, and they fail when the structure of the economy shifts. In 2021, the conventional measures were slow to signal the rise in trend inflation, and the FOMC’s own quarterly forecasts lagged the data rather than anticipating it.

Read the full [*Brookings Institution* article](https://www.brookings.edu/articles/rethinking-fed-operations-recommendations-to-the-five-task-forces/).
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*Kim Schoenholtz is Clinical Professor Emeritus at NYU Stern.*

## More from Kim Schoenholtz

- [Is Tether the Coppernose of Our Time?](https://www.stern.nyu.edu/experience-stern/faculty-research/opinion/tether-coppernose-our-time)
- [Ignore the Bank Lobby, Regulators. It’s High Time For Banking Reform.](https://www.stern.nyu.edu/experience-stern/faculty-research/ignore-bank-lobby-regulators-its-high-time-banking-reform)
- [The Dangerous Role of America’s Weird Lenders-of-Next-to-Last Resort.](https://www.stern.nyu.edu/experience-stern/faculty-research/dangerous-role-americas-weird-lenders-next-last-resort)
- [Making Banks Safe.](https://www.stern.nyu.edu/experience-stern/faculty-research/making-banks-safe)
- [Managing Disinflations](https://www.stern.nyu.edu/experience-stern/faculty-research/managing-disinflations)