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Warsh reiterates Fed’s focus on price stability, avoids rate guidance

In testimony before Congress, Federal Reserve Chair Kevin Warsh said the Fed has no tolerance for persistently elevated inflation and emphasized that longer run inflation depends largely on monetary policy after a softer June CPI print.

Reported · Written up by our desk · Central Banks

Federal Reserve Chair Kevin Warsh told Congress in his first semiannual testimony that the Fed’s top priority is restoring price stability, stressing that policymakers have “no tolerance for persistently elevated inflation.” He pledged that if the Fed gets policy right, the inflation surge from the prior five years can be brought to an end, according to Action Forex.

Warsh delivered his remarks just hours after June CPI came in softer than expected, but he avoided providing clues about the near term interest rate outlook. Action Forex noted that investors appeared to find little in the testimony to challenge the softer inflation narrative established earlier in the day.

While he said monthly price fluctuations are inevitable, especially in an unsettled world, Warsh argued that inflation over longer horizons is determined largely by monetary policy. He also declined to endorse speculation about another near term rate hike despite renewed geopolitical tensions and higher oil prices.

Beyond the immediate policy stance, Warsh used the testimony to lay out what he described as a “new chapter” for the Federal Reserve. Action Forex reported that he again criticized the Fed’s 2020 average inflation targeting framework as a mistake, and highlighted accelerating business investment, particularly in artificial intelligence, describing it as a defining feature of the current economy.

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