The Fed chair told lawmakers that the central bank will not accept persistently elevated inflation, framing a return to price stability as a non-negotiable goal
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Federal Reserve Chair Kevin Warsh will pledge Tuesday to defeat five years of above-target inflation, telling lawmakers in his first appearance before Congress as the central bank's leader that getting monetary policy right is the Fed's "No. 1 objective."
"If we get policy right — and we will — the inflation surge of the last five years will be a thing of the past," Warsh will tell the House Financial Services Committee, according to his remarks prepared for delivery released by the Fed on Tuesday morning. His appearance marks Warsh's first congressional testimony as Fed chair. He is scheduled to appear before the Senate Banking Committee on Wednesday.
Warsh will tell lawmakers the committee would not accept persistently elevated inflation, framing the return to price stability as a shared, non-negotiable goal. "While monthly price fluctuations are inevitable — especially in an unsettled world — underlying inflation over longer time horizons is determined largely by monetary policy," he will say. Warsh's prepared remarks echoed his predecessor Jerome Powell in characterizing prolonged inflation as "an undue burden on American households and businesses."
At his first Federal Open Market Committee meeting in June, Warsh led a unanimous vote to hold the benchmark federal funds rate steady at a target range of 3.5% to 3.75%, a level that has been unchanged across four consecutive meetings. Nine of 18 policymakers at that gathering saw the case for at least one rate hike before year-end. Warsh, who has been critical of forward guidance, declined to submit a rate forecast himself.
Turning to the wider economic picture, Warsh said in his prepared remarks that the economy is "expanding at a solid pace." He singled out business investment as "the most striking feature" of today's economy, citing the rapid buildout of data centers and surging orders for AI-related equipment and software. Equipment investment rose about 8% for the year ending in the first quarter, with high-tech spending growing at close to 25% on a four-quarter basis, he said. "We don't know the extent to which the economy will benefit from the AI buildout," Warsh said, noting that the central bank is keeping close watch on what the investment wave means for both prices and employment.
Warsh also described five internal task forces he established to take stock of how the Fed conducts its work, with each group assigned to one of several focus areas: communications, the balance sheet, economic data, productivity and jobs, and the central bank's approach to inflation. Each group has been charged with examining current practices and proposing changes, he said.
The Fed's June meeting minutes showed officials were divided on the rate path, with the committee split between holding steady and tightening further. Total PCE inflation rose to an estimated 4.1% in May and core PCE to an estimated 3.4%, with a majority of participants judging that risks to the inflation outlook remained tilted to the upside. The next FOMC meeting is scheduled for July 28–29.
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