Federal Reserve Chair Kevin Warsh pledged Tuesday to end what he called five years of excessive inflation, telling lawmakers that "the inflation surge of the last five years will be a thing of the past" if the central bank gets monetary policy right.
Warsh's appearance before the House Financial Services Committee was his first semiannual testimony before Congress since he became Fed chair in May. He described inflation as "an undue burden on American households and businesses" and said the Fed's rate-setting committee has "no tolerance for persistently elevated inflation." The central bank held its benchmark federal funds rate steady at a target range of 3.5% to 3.75% at its June meeting, Warsh's first as chair.
Warsh called for a "regime change" in the Fed's approach to policy. "It has been a tax on the American people and businesses. We plan on getting rid of that tax," he told lawmakers. He also criticized a 2020 Fed framework known as flexible average inflation targeting, which allowed for above-target inflation after periods of lower prices, calling it "a mistake."
Warsh laid out the five task forces he has established to conduct a broad review of the Fed's operations and decision-making. Their areas of focus include how the Fed communicates, manages its balance sheet, uses economic data, approaches productivity and employment, and frames its inflation goals. He said the groups were charged with starting "from first principles, asking hard questions" and proposing changes for policymakers' consideration.
On the broader economy, Warsh said activity is "expanding at a solid pace." Business investment, driven especially by data center construction and AI-related infrastructure, stood out to Warsh as "the most striking feature of the economy right now." He cited roughly 8% growth in equipment investment through the first quarter on a year-over-year basis, with high-tech spending climbing by close to 25% over the same four-quarter period. The housing sector, however, "continues to lag."
Warsh's testimony came on the same day that new Consumer Price Index data showed annual inflation fell to 3.5% in June from 4.2% in May. He cautioned against reading too much into a single month's data. "There might be some that look at this morning's data and say, 'Oh, mission accomplished. Everything is swell.' That is not my view," he told lawmakers, according to CNN.
Warsh is scheduled to appear before the Senate Banking Committee on Wednesday.
The Fed held rates steady at Warsh's first FOMC meeting in June, where a majority of officials signaled they saw the case for at least one rate increase before year-end. The Fed named the leaders of the five task forces last week, drawing from academia, business, and former central banking, with notable figures including Marc Andreessen and former Walmart $WMT CEO Doug McMillon.