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Fed chair Warsh warns of rate risk if inflation is not easing

Warsh said inflation readings over the summer looked better than expected, but the data had not meaningfully improved, with prices at 3.4% year over year in July.

Reported · Written up by our desk · Central Banks

BBC Business reports that the head of the US central bank, Fed chair Kevin Warsh, said policymakers would have “work to do” if they were not confident cost of living pressures were easing for Americans.

Warsh said recent inflation data did not show the overall picture had meaningfully improved, even though readings over the summer looked better than expected. He noted that prices rose 3.4% in the year to July, above the Fed’s 2% target, and that another closely watched inflation measure was running at 3.7%.

He said the Fed’s predominant focus should be on prices when inflation is rising by more than 2% on an annual basis, adding that the central bank would need to be confident underlying inflation is moving toward its objective at sufficient speed.

Warsh also stressed his remarks should not be treated as a guide for future interest rate decisions. In his first speech at the Jackson Hole Economic Policy Symposium, he said investors would watch for signs of rates potentially being raised if inflation is viewed as too high, and he urged against treating comments as forward guidance.

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