Fed Chair Warsh Avoids Details on AI Inflation Impact and Trump Contacts During Senate Hearing

Federal Reserve Chair Kevin Warsh faced a series of questions from senators on Wednesday about the potential inflationary effects of artificial-intelligence (AI) investment, the criteria the Fed will use to judge whether price increases are temporary, and whether he has spoken with President Donald Trump since taking office. Warsh said he would offer less guidance on future rate moves than his predecessors and largely avoided detailed explanations of the central bank’s broader response strategies.

“I don’t view a one-time change in prices as necessarily being inflationary, because I think there’s a supply response,” Warsh said when asked about massive AI infrastructure spending. “Will it increase measured prices over the course of the next 12 months? I suspect it will be. Whether that’s inflationary or not, that’s up to the Federal Reserve, and we’re going to have something to say about that.”

He noted that the Fed’s June 16-17 meeting minutes indicated many committee members believed strong demand for AI infrastructure could sustain upward pressure on technology product and electricity prices. The Fed remains divided on whether to raise rates later this year.

Warsh also commented on recent inflation data, which showed wholesale price growth slowing in June and consumer prices falling for the first time in six years, bringing annual inflation down to 3.5% from 4.2% in May. He said any central banker would welcome data moving in the right direction but cautioned that such measures are imperfect indicators of underlying inflation.

To address data concerns, Warsh referenced a task force he created to review the sources of information the Fed uses, suggesting it could improve how government statistical agencies handle an evolving economy. He announced five task forces that will examine the Fed’s inflation framework, AI’s impact on jobs and productivity, and the central bank’s holdings of government bonds.

When asked how the Fed will decide if inflation is persistent, Warsh said the agency will look at whether price rises are confined to a single category or affect the broader price level, and that the task forces will help answer “the big and hard questions.”

Regarding political independence, Warsh reiterated his intent to act autonomously and resist pressure from the president, who has previously called for lower interest rates. He declined to confirm any recent discussions with Trump, stating, “I don’t want to be in the business of sharing discussions that the president and I have,” and added that he has repeatedly told the president and the Treasury Secretary that an independent figure was chosen for the job and that he intends to fulfill that role.