Fed Chair Warsh Says Policymakers Unwilling to Accept Persistent Inflation

Federal Reserve Chair Kevin Warsh testified before the House Financial Services Committee, stating that the central bank’s policymakers have "no tolerance for persistently elevated inflation." He said the concern over inflation helped shape the Fed’s decision to keep the federal funds rate steady at 3.5%-3.75% during its June meeting.

Warsh emphasized that the Fed’s primary goal is to manage monetary policy effectively, adding that the recent surge in inflation should become "a thing of the past" if policy is correctly calibrated. He noted that while short-term price fluctuations are expected, longer-term inflation is largely driven by monetary policy and that the committee is committed to restoring price stability.

When asked about potential political pressure from President Donald Trump, Warsh referenced a recent Supreme Court ruling affirming the Fed’s independence and said he would continue his duties regardless of any attempts to influence or remove him. He expressed a desire for the institution to operate without political interference.

Warsh also addressed the Fed’s dual mandate of full employment and price stability, asserting that the two objectives are complementary. He described the labor market as relatively balanced but acknowledged that more work is needed on the inflation front.

Regarding artificial intelligence, Warsh described it as a major economic shift, offering both opportunities for the United States and potential security risks. He cautioned that while AI could benefit the economy, it also poses challenges that could test financial infrastructure and attract malicious actors.