Federal Reserve Chair Kevin Warsh reiterated his commitment to restoring price stability in his first semiannual testimony before Congress, but stopped well short of offering any clues on the near-term interest rate outlook. Speaking just hours after June CPI came in much softer than expected, Warsh repeated that the Fed’s “number one objective is to get monetary policy right” and pledged that “if we get policy right — and we will — the inflation surge of the last five years will be a thing of the past.” The testimony reinforced his long-term policy philosophy rather than altering market expectations, with investors finding little to challenge the softer inflation narrative established earlier in the day.
Warsh maintained a firm stance on inflation throughout his prepared remarks. He stressed that policymakers have “no tolerance for persistently elevated inflation” and share “a resolute commitment to restoring price stability.” At the same time, he avoided endorsing recent speculation about another near-term rate hike despite renewed geopolitical tensions and higher oil prices. Instead, he argued that while “monthly price fluctuations are inevitable — especially in an unsettled world,” inflation over longer horizons is “determined largely by monetary policy.” The combination of softer CPI and Warsh’s refusal to signal a policy path leaves the Federal Reserve with greater flexibility to assess whether the latest rise in energy prices develops into broader inflation.
Beyond the immediate policy outlook, Warsh continued to outline what he described as “a new chapter at the Federal Reserve.” He again criticized the central bank’s 2020 average inflation targeting framework, calling it “a mistake” that sought “a little more inflation and end[ed] up with a lot more.” He also highlighted accelerating business investment, particularly in artificial intelligence, describing it as “the most striking feature” of today’s economy and suggesting that what is now known as AI investment “will soon be called just investment.” Overall, the testimony was notable less for new policy signals than for confirming Warsh’s preference to avoid forward guidance while emphasizing credibility, institutional reform and a disciplined commitment to defeating inflation.
