The Fed's independence doesn't mean isolation. A functional working relationship with the Treasury is crucial for practical matters like ensuring Treasury market liquidity and coordinating bank regulation, areas where responsibilities overlap.

If incoming Fed Chair Kevin Warsh reduces public communication, it could increase market uncertainty about future policy. This lack of clear forward guidance may lead investors to demand a higher risk premium for holding long-term bonds, causing the U.S. Treasury yield curve to steepen, all else being equal.

While interest rates are set by a committee vote, the Federal Reserve Chair wields immense influence by deciding what policy to propose and acting as the primary communicator to markets. The public and financial markets give deference to the chair's views, making their ability to shape the narrative a powerful tool.

Despite their public prominence, the Fed Chair only has one of twelve votes on the FOMC. Their influence stems from persuading committee members. Chairs avoid being outvoted by understanding the committee's consensus and sometimes aligning with it rather than forcing a losing vote.

To ensure smooth policy decisions, modern Fed chairs like Jerome Powell personally call all 18 voting and non-voting FOMC members before each meeting. This intensive, bilateral communication process is key to building consensus and setting the meeting's agenda.

A new Fed Chair advocating for a smaller balance sheet cannot simply sell assets without causing market volatility. The Fed must first implement complex, long-term regulatory changes to reduce commercial banks' demand for reserves. This involves coordination with the Treasury and is not a quick policy shift.

Despite intense political criticism, a coalition including former Fed chairs, Treasury secretaries from both parties, and major bank CEOs has publicly defended the central bank's independence. This signals that markets view a non-politicized Fed as critical for economic stability, overriding political allegiances.

These events are not just academic exercises. They are where initial, data-driven ideas that will shape future monetary and economic policy are first presented, critiqued, and refined by peers, serving as the first draft of policy debates.

Despite the perception of independence, the Federal Reserve historically yields to political pressure from the White House. Every US president, regardless of party, has ultimately obtained the monetary policy they desired, a pattern that has held true since the Fed's creation.