Wash begins to act: delivers an internal speech on "adhering to fine traditions but seeking reform," appoints an adviser who once suggested "a complete restructuring of the Federal Reserve."

Kevin Walsh, the new chairman of the Federal Reserve, has officially launched his reform agenda. In his first internal memo sent to more than 20,000 staff, he promised to adhere to the "finest traditions" of the Fed, while clearly stating his intention to pursue change. Meanwhile, he appointed two conservative policy figures as transition advisors, one of whom helped draft a policy blueprint advocating for a "complete restructuring of the Fed".

According to a memo obtained by Reuters on June 2, Walsh wrote: “Our primary task is to formulate the correct policy within our responsibilities and the framework of national interests.” He also stated, “When we discover better alternatives, we will not rely on past practices,” and he previewed “open and sober discussions” about the Fed’s strategy, policy, and operations over the next few quarters.

The appointment of the two advisors has attracted market attention. Sources reveal that Paul Winfree was the lead author of the section on Fed reform in the conservative policy blueprint Project 2025, which proposes radical ideas including abolishing the Fed's dual mandate, drastically shrinking its balance sheet, and even abolishing the Federal Reserve itself.

Walsh's first policy meeting as chairman is scheduled for June 16–17, where he will make his first substantive remarks on the economy and monetary policy since taking office.

First Internal Memo: Reform Resolve and Reassurance in Tandem

Walsh was sworn in at the White House on May 22, officially succeeding Powell as chairman of the Fed for a four-year term. The memo, sent out Tuesday and reviewed by Reuters, served as his first channel for sending governance signals to internal staff.

The language of the memo seeks a balance between reform resolve and organizational cohesion. Walsh wrote: “This new chapter for the Fed comes at a time when our nation faces important choices. New technologies and business models are emerging at unprecedented speed.” He stated, “I am confident in what we can accomplish together.”

This tone contrasts with his previous public stance. While awaiting appointment, Walsh publicly criticized the Fed’s policy direction under Powell multiple times and voiced criticism of the entire Fed system—including its 12 regional banks—arguing that it had strayed from its core monetary policy responsibilities. Now, as head of the institution, he adopts a more cohesive tone in his memo.

Background of the Two Advisors: Conservative, No Fed Experience

According to the Wall Street Journal and Reuters, the two transition advisors appointed by Walsh are hired on temporary contracts to help plan initial priorities after assuming office. No long-term decision has yet been made.

Daniel Heil is currently a policy researcher at Stanford University’s Hoover Institution and was an economic policy advisor for Jeb Bush’s 2016 presidential campaign. His recent research focuses on cutting federal medical spending and Social Security reform. Walsh served as a distinguished fellow at the Hoover Institution before becoming Fed chair, making the two colleagues.

Paul Winfree served as a domestic policy expert at the White House during Trump’s first term, later joined the Heritage Foundation, and in 2023 founded the conservative fiscal policy think tank Economic Policy Innovation Center (EPIC). The institute announced last week that it would cease operations.

Notably, previous Fed chairmen would also appoint one or two senior policy advisors when taking office, but these came from current or former Fed staff with monetary policy expertise. Neither Winfree nor Heil has any Fed employment experience, and their expertise is not in core areas of monetary policy or bank supervision.

Radical Proposals and Subsequent Distancing of Project 2025 Advisor

Winfree's appointment attracted particular attention because of his connection to Project 2025, as he is the listed author of the chapter on Fed reform in the conservative policy blueprint.

This chapter outlines several radical proposals: abolishing the Fed’s dual mandate of price stability and full employment, requiring a singular focus on inflation; drastically reducing the Fed’s $6.7 trillion asset portfolio; restricting its role as lender of last resort during financial crises. The chapter also lists “free banking”—abolishing the Fed and replacing it with privately issued commodity-backed currency—as a reform option.

However, Winfree has since distanced himself from some of these proposals. In a 2024 interview with Roll Call, he remarked: “I do think the Fed should be reformed, but I don’t support ‘nuking the Fed.’” His recent research has also become more moderate: in a paper written for EPIC last year, he concluded that Fed bond purchases had not led to sustained federal deficits, a finding that contradicts common conservative criticism of the Fed.

Earlier this year, he wrote in the Washington Post warning that the Trump administration’s support for cryptocurrency could create a bubble comparable in scale to the 2008–2009 housing crisis.

First Policy Meeting Imminent, Multiple Uncertainties Loom

Walsh’s start as chair is far from typical. The June 16–17 policy meeting will be the first under his leadership, and the market expects the Fed to keep rates unchanged, but the latest economic forecasts released then will offer important clues regarding the direction of policy under Walsh and the committee’s assessment of inflation prospects—currently still above the Fed’s 2% target.

Meanwhile, the Fed is awaiting a Supreme Court ruling on the Trump administration’s attempt to dismiss board member Lisa Cook, a move widely seen as a direct threat to the Fed’s monetary policy independence. In addition, Powell has decided to remain on the board due to executive branch intervention in Fed affairs, meaning Walsh and his predecessor will serve together on the decision-making body.

On the reform agenda, Walsh has openly set directions including: shrinking the Fed’s $6.7 trillion balance sheet, reducing forward guidance in future rate decisions, and exploring whether alternative inflation measures can more accurately reflect price pressures.

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