Bond investors are watching next week’s Federal Reserve meeting for signs of how new Chair Kevin Warsh will change the central bank’s communication with markets.

Richard Clarida, a former Fed vice chair and Pimco’s global economics adviser, said investors are trying to understand how Warsh will put his own stamp on Fed messaging after replacing Jerome Powell.

Warsh has previously criticized forward guidance and signaled support for a less open approach to monetary policy. During his Senate confirmation hearing in April, he said he does not believe in forward guidance.

That has left investors weighing whether the Fed could move toward shorter policy statements, fewer press conferences, or changes to the dot plot, which shows officials’ projections for interest rates.

Pimco Chief Investment Officer Daniel Ivascyn said less communication could create more volatility and uncertainty in markets. He added that a Warsh led Fed is still expected to remain independent on the issues markets care about most, including rates and balance sheet policy.

The shift comes as bond markets have already moved sharply this year. Traders have gone from pricing rate cuts to expecting more tightening after the war in the Middle East fueled inflation concerns and pushed short term yields higher.

Ivascyn warned that cutting rates during a period of inflation and economic uncertainty could backfire if longer term yields move higher instead. That would make the Fed’s job harder by tightening financial conditions further out the curve.

For Pimco, the bigger question may be the Fed’s balance sheet. The central bank’s holdings have fallen to about $6.7 trillion from a 2022 peak near $9 trillion, and Warsh has linked a smaller balance sheet to the possibility of lower rates.

Ivascyn said balance sheet policy could have major implications for the yield curve and the performance of different maturities, making it more important than any changes to Fed communication or forward guidance.