New Federal Reserve Chair Kevin Warsh said Wednesday that inflation remains too high and emphasized the central bank’s commitment to staying independent and reining in price increases, despite pressure from President Trump to cut interest rates.
“If there were people in household or the business sector, in the financial markets, who thought that this central bank was going to be comfortable with an inflation objective above 2%, well, I guess they’d be disappointed,” Warsh said at a European Central Bank forum in Sintra, Portugal. “We’re going to deliver price stability in the U.S.”
Warsh’s comments followed his similarly hawkish inaugural press conference as Fed chair two weeks ago. His remarks run counter to his calls for lower interest rates prior to becoming Fed chair — and to President Trump’s oft-stated demand that rates should come down sharply.
“We've all looked around, and we've seen that prices are too high,” Warsh said. The Fed’s preferred inflation gauge rose to 3.4% in May, the highest level in nearly three years.
Warsh tempered that hawkishness by noting that inflation expectations have fallen in recent weeks. That’s due in large part to a plunge in oil prices following a ceasefire in the war in Iran. While economists worry that soaring investments in artificial intelligence could boost near-term inflation, Warsh also suggested that the AI boom may increase economic productivity and eventually reduce inflationary pressures.
When asked about Trump’s push for rate cuts, Warsh emphasized the Fed’s independence: “We've been an independent central bank for a very long time. We're going to be an independent central bank at this moment, and you're going to see no changes on that.”
Warsh also repeatedly stuck to his insistence that the Fed and its officials should not provide “forward guidance” and should be tighter lipped regarding their outlook for the economy and monetary policy. Warsh repeatedly pushed back on a moderator’s attempts to elicit such views, and his rejection of forward guidance won support from the other central bankers on the panel. He shared the stage with ECB President Christine Lagarde, Bank of England Governor Andrew Bailey and Bank of Canada Governor Tiff Macklem.
The Fed’s policymakers will hold their next two-day meeting starting on July 28. Markets now see a better than 70% chance that the bankers will hold rates steady this month, but a roughly 50% likelihood of a rate hike at the September 15-16 meeting.