In his first major speech as Fed chair, Warsh said inflation remains a key concern despite recent signs of moderation. His comments at the Federal Reserve’s annual symposium in Jackson Hole, Wyoming, were closely watched by financial markets for clues about the central bank’s next move.
Warsh did not indicate whether the Fed would raise or cut interest rates in the coming months. However, investors interpreted his emphasis on price stability as a sign that policymakers could keep rates higher for longer or potentially raise them if inflation remains persistent.
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The comments could put Warsh at odds with President Donald Trump, who has repeatedly pushed the Federal Reserve to lower borrowing costs.
Warsh offered a relatively positive assessment of the US economy, saying it appears to have strengthened despite a series of economic shocks. He said both consumers and financial markets had shown resilience.
The Fed chair also rejected the idea that his Jackson Hole speech should provide detailed guidance about future monetary policy. He argued that the era of explicit “forward guidance” adopted during the 2008 financial crisis had lasted too long.
The Fed’s next rate decision will come against a backdrop of persistent inflation. US inflation reached a three-year high of 4.2% in May before easing to 3.4% in July, according to the latest data. That remains well above the central bank’s 2% target.
Warsh said the progress made in bringing inflation down over recent years had been “modest.” Although recent price data were better than expected, he said they did not show that underlying inflation trends had meaningfully improved.
The Fed’s policy outlook has already become more divided. At its July meeting, three of the 12 voting members favored a quarter-point rate increase, marking an unusually large number of dissenting votes. The majority opted to keep the benchmark rate unchanged at 3.5% to 3.75%.
Higher inflation has also kept pressure on the US bond market. The yield on the 10-year Treasury note recently reached its highest level since 2007, while rising US yields have contributed to higher borrowing costs in major economies including the UK, Germany, France and Japan.
Following Warsh’s remarks, yields on two-year and 10-year US Treasury notes edged higher, while the 30-year yield was little changed. The S&P 500 was broadly flat and the Dow Jones Industrial Average slipped slightly.
With inflation still above target and policymakers divided over the appropriate path for interest rates, markets are likely to scrutinize upcoming economic data for clearer evidence of whether the Fed will eventually ease policy or move toward further rate increases.
