At the European Central Bank's (ECB) Central Banking Forum in Portugal on 1/7, US Federal Reserve (Fed) Chairman Kevin Warsh emphasized his concern about inflation, though he declined to signal any interest rate decisions for this month's meeting.
Warsh stated during a panel discussion, “Over the past few days, we've all had open discussions about AI and productivity. Additionally, looking around, we see that prices are too high.” He expressed relief that recent inflation forecasts have moderated, but stressed that current figures are still not reassuring. “If households, businesses, or investors believe the Fed accepts inflation above 2%, they will be disappointed. We will restore price stability in the US,” he said.
The Personal Consumption Expenditures (PCE) index, the Fed's preferred measure of inflation, rose by 4,1% year-on-year in May—the highest increase in three years. For over five years, US inflation has consistently remained above the Fed's 2% target.
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Fed Chairman Kevin Warsh in Portugal on 30/6. Photo: Reuters. |
Fed Chairman Kevin Warsh in Portugal on 30/6. Photo: Reuters.
Following Warsh's remarks, investors slightly reduced their forecasts for a Fed rate hike. However, they still bet on a 70% chance of Fed action at the September meeting. Oren Klachkin, an economist at Nationwide, assessed, “It appears investors' initial assumption that the Fed under Warsh's leadership would soon cut interest rates is not materializing.”
When asked if his stance would disappoint US President Donald Trump, Warsh affirmed the Fed's independence. “We are an independent agency, and this will not change,” he replied. Trump nominated Warsh for the Fed chairmanship and had previously stated multiple times his desire for lower interest rates.
This marks Warsh's first public statement since his Senate confirmation in May, aside from a press conference following a policy meeting two weeks ago. The Fed has kept interest rates unchanged since the beginning of this year, balancing persistent inflation with other economic factors.
Looking ahead, Warsh announced that next week, he would unveil personnel for the five working groups he mentioned last month. These groups are aimed at evaluating the Fed's operations, with a goal to improve monetary policy implementation. He expects that over the next 9-12 months, the agency will implement new technologies to better understand real-time economic conditions. “This will help us make better decisions,” he said.
Ha Thu (according to Reuters, CNBC)
