F/m Investments' Washington, D.C., office is just a short drive from the Federal Reserve's headquarters. But under the central bank's new leadership, CEO Alexander Morris has found the distance feeling far greater.
Fed Chairman Kevin Warsh embarked on an overhaul of the central bank's forward-looking communication since taking the post in May. That move sounded the alarm for market participants like Morris, whose investing theses rely in part on predicting what the Fed will do with interest rates.
"We've made a pretty good business out of decoding Fedspeak," said Morris, referring to the jargon-heavy communication preferred by central bank leaders. "And he just said he was going to go quiet on us."
This week, Morris' firm, which manages exchange-traded funds tied to inflation and U.S. Treasurys, released "WarshGPT." It's an artificial intelligence-powered tool that parses nearly 1,800 documents and transcripts from Warsh, with the goal of helping users understand how he may analyze issues related to the economy or monetary policy.
F/m Investments is one of many financial institutions readying for an era with less public forecasting from Warsh's Fed. In some cases, they're turning to AI models to gain an edge in investing.
"Whether the Fed is providing a lot of information or a little information, investors have to understand what the Fed is likely to do in the future," said Gary Richardson, a former historian at the central bank who's now a University of California, Irvine, economics professor. "With limited information, people are going to try to do anything they can to figure out what the Fed is thinking."
Greetings and briefcase sizes
Investors and Fed watchers have wondered if former Chairman Alan Greenspan's communication style can serve as a baseline for what to expect under Warsh.
In that era, Richardson said people joked that Greenspan simply saying "good evening" could cause a market decline. Financial media tracked a so-called briefcase indicator, which operated on the theory that Greenspan carrying a bulkier bag meant he accumulated evidence for why borrowing costs should be altered.
Already, Warsh has made expectations clear for a shift in how the Fed publicizes information. One of his task forces aimed at reshaping the Fed's operations is focused on how the central bank communicates.
June's Federal Reserve meeting statement — the first such release under Warsh — contained around 130 words, down from figures above 300 words seen in prior publications, a CNBC analysis found. Warsh, who acknowledged the statement was "shorter" and "simpler," said it purposefully excluded forward guidance.
In his first post-decision press conference as chairman, Warsh allocated 5% of sentences to policy-relevant topics, according to UBS. That number came in at 27% for an average meeting under predecessor Jerome Powell, the bank said.
'One word can move dollars'
F/m Investments' WarshGPT chatbot cost less than $1,000 to build with Anthropic's Claude model, despite the name being a riff on rival OpenAI's ChatGPT. It took roughly two weeks to create from inception to release, a timeframe that included pre-rollout testing by a group that included Fed alumni and newsletter writers.
In addition to Warsh's communications, the product also taps into economic and political history to ensure its responses have context. But F/m set limits to what WarshGPT can do: The bot doesn't talk as Warsh and will not offer offer forward statements or forecasts.
F/m isn't the only large firm reconsidering its strategies and tools for understanding a Warsh-led central bank.
UBS runs an interactive dashboard for clients to track the Fed's policy tone. It allows users to have an unbiased assessment of Warsh's commentary during meetings, according to Elena Amoruso, a strategist at the Swiss bank.
Following Warsh's debut policy meeting as chief last month, Amoruso told clients that Warsh's policy-relevant comments were "overwhelmingly hawkish." The central bank leader's stance was driven by his views on the labor market and growth, she said, in addition to the state of inflation.
"Arguably, this is the most high-value data set … in terms of how much one word can move dollars," Amoruso told CNBC.
At JPMorgan Asset Management, chief global strategist David Kelly has some backup plans if the Fed stops putting out key releases. If the central bank does away with the "dot plot," for instance, Kelly said his team will more closely mull over speeches by members of the Federal Open Market Committee — the group tasked with setting interest rates — to get a sense of how they would next vote.
To be sure, Kelly said major changes to Fed communication would likely take several months to announce and implement. He said the final decisions may not be as drastic as some expect.
"Just like the Federal Reserve says it can be patient in adjusting interest rates to the economy, we can be patient in adjusting our resources," Kelly said.
'Less clarity'
Still, investors anticipate having less forward guidance from the Fed could result in bigger market swings after policy decisions or members' public appearances. Some traders see a chance to rake in larger returns in this environment.
"If there's less communication about the reaction function, I actually think that's a negative for the economy," said Steve Friedman, a New York Fed alum who's now senior macroeconomist at MacKay Shields. However, "less clarity about what the Fed may do can actually be a source of alpha for investors if you have a robust framework for thinking about the economy and monetary policy."
If Warsh dials back public speaking engagements, Friedman said he would more closely monitor speeches from Fed Governor Christopher Waller. Friedman described Waller as a "bellwether" for the broader committee.
Waller said this week that the Fed shouldn't be focused on "fighting the last war" with inflation, but that interest rate hikes could still be on the table.
Retail traders may need to further diversify their portfolios to account for added policy uncertainty under Warsh, according to UC-Irvine's Richardson. Investment firms looking to get ahead, meanwhile, will be spending big to hire Fed alumni who can help make predictions in a lower-transparency environment, Richardson said.
There are already differing expectations forming for how the Fed will proceed with policy in the coming months.
Fed funds futures traders are pricing in an almost 59% likelihood that the central bank increases interest rates in September, according to CME's FedWatch tool. On the other hand, Kalshi traders think it's most likely that the Fed will keep rates unchanged at that meeting.
"For ordinary investors, it's already really hard for them to figure out what's going on," Richardson said. "It's going to become much harder."
Facts Only
* Kevin Warsh took office as Federal Reserve Chairman in May.
* Warsh is implementing a change in the central bank's forward-looking communication.
* June's Federal Reserve meeting statement contained approximately 130 words.
* Previous Federal Reserve meeting statements exceeded 300 words.
* In his first post-decision press conference, Warsh's policy-relevant sentences accounted for 5% of the total, compared to a 27% average under Jerome Powell.
* F/m Investments created "WarshGPT," an AI tool using Anthropic's Claude model.
* WarshGPT parses nearly 1,800 documents and transcripts from Kevin Warsh.
* The development of WarshGPT cost less than $1,000 and took roughly two weeks.
* UBS provides an interactive dashboard for clients to track Federal Reserve policy tone.
* Fed funds futures traders indicate a 59% likelihood of an interest rate increase in September.
* Kalshi traders indicate a higher likelihood that rates will remain unchanged in September.
Executive Summary
The Federal Reserve, under the leadership of Chairman Kevin Warsh, is shifting toward a strategy of reduced transparency and limited forward guidance. By shortening official statements and decreasing the density of policy-relevant commentary during press conferences, the central bank is moving away from the explicit signaling characteristic of the Jerome Powell era. This shift has created a vacuum of information that market participants are attempting to fill using new technological and analytical tools.
Financial institutions are responding with diverse strategies to regain predictive clarity. F/m Investments has deployed an AI-powered chatbot to analyze Warsh's historical communications, while UBS utilizes sentiment dashboards and JPMorgan Asset Management prepares to rely more heavily on the individual speeches of FOMC members. While some economists argue this lack of clarity could negatively impact the broader economy by increasing volatility, some investors view the ambiguity as an opportunity to generate "alpha" through superior economic modeling. The resulting uncertainty is reflected in conflicting market predictions regarding September's interest rate decisions.
Full Take
The strongest version of this narrative is that the Federal Reserve is intentionally reclaiming its strategic ambiguity to avoid boxing itself into future policy commitments, forcing the market to rely on fundamental economic data rather than "Fedspeak" divination.
The pattern here is a transition from a "guidance-based" regime to an "interpretation-based" regime. We are seeing the emergence of an AI-driven arms race where the "edge" is no longer about having the data—since the data is public—but about the sophistication of the linguistic model used to decode it. This creates a paradox: as the Fed provides less information to stabilize markets, firms deploy more complex technology to find hidden signals, potentially amplifying the very volatility the Fed seeks to manage.
The root cause is a paradigm shift in central banking philosophy, echoing the Alan Greenspan era where the "briefcase indicator" replaced the policy map. The unstated assumption is that the "truth" of policy intent exists in a latent space that can be extracted via Large Language Models if the prompt is right and the dataset is sufficiently large.
The implication is a widening gap in agency. Institutional investors with the capital to hire Fed alumni and build proprietary AI tools gain a significant advantage over retail investors, who are left to navigate a "lower-transparency environment" with fewer resources. This effectively democratizes the *tool* (AI) but concentrates the *insight* among those who can refine the models with elite human expertise.
Patterns detected: none
If this were an influence campaign, the playbook would involve fabricating a "crisis of silence" to drive panic-buying of specific AI financial tools or "expert" consulting services. The current content does not match this; it reports a legitimate shift in institutional behavior and the subsequent market reaction.
Bridge Questions:
1. Does the move toward ambiguity actually protect the economy from market overreaction, or does it simply shift the volatility to different triggers?
2. If AI models become the primary lens through which the Fed is understood, does the Fed effectively lose control of its own narrative to the biases of the models?
3. What happens to market stability when two different "top-tier" AI models interpret the same silence in opposite ways?
Sentinel — Human
The analysis is highly likely human-written, demonstrating a sophisticated synthesis of financial commentary and historical context rather than purely machine-generated aggregation.