Federal Reserve Chairman Kevin Warsh said Friday that persistent inflation remains the central bank’s primary concern, warning that interest rates could need to move higher if underlying price pressures fail to improve.
Speaking at the Fed’s annual symposium in Jackson Hole, Wyoming, Warsh said recent inflation readings were encouraging but insufficient to show a meaningful improvement in underlying trends.
He said policymakers must be confident that inflation is moving toward the Fed’s 2% objective at a sufficient pace. “Otherwise, we have work to do,” Warsh said, emphasizing that controlling inflation remains central to the Fed’s mandate.
A Different Approach to Fed Communication
Warsh, who took over as Fed chair in May and noted that Friday marked his 100th day in the position, used the speech to explain his broader policymaking philosophy rather than announce a rate decision.
He criticized forward guidance, arguing that markets should respond primarily to economic data rather than depend heavily on policymakers’ statements.
Warsh called for a “quieter Fed” with more purposeful communication and said policymakers should avoid creating expectations around future interest-rate decisions.
He also declined to establish a fixed reaction function for how the Fed would respond to stronger or weaker economic data.
Warsh said economic conditions change too quickly for policymakers to rely on rigid rules, citing shifts in geopolitics, global supply chains and technology.
Economy Shows Strength Despite Weak Spots
Alongside his inflation concerns, Warsh offered a relatively positive assessment of the US economy. He said economic activity appears to have strengthened and pointed to strong business and consumer spending.
Artificial intelligence was another part of his economic outlook, with Warsh highlighting growing investment and capital deployment around AI. He acknowledged slower hiring but attributed the weakness partly to a flattening labor supply.
Financial markets reacted modestly to the speech. Treasury yields moved higher, while stocks were little changed to slightly lower. Two-year Treasury yields reached their highest level in about a month, according to The New York Times.
Warsh did not commit to a specific policy move at the Fed’s September meeting. Instead, his message was that inflation remains the immediate priority and that monetary policy will continue to depend on evolving economic conditions.
