Warsh Defends Steady Rate Policy Amid Inflation Concerns

The Federal Reserve's decision to keep the fed funds policy rate unchanged at 3.75% came as no surprise, but its implications are worth examining.

In July, the FOMC met market expectations by holding rates steady, and three participants dissented in favor of a hike.

Chair Kevin Warsh acknowledged that inflation has been persistently above-target, but he emphasized that the Fed's mandates are not at war with each other.

Warsh noted that while the US economy is doing well on full employment, it is struggling with prices. He also highlighted the challenge of assessing aggregate supply and demand in light of the surge in AI-related capex.