Warsh Puts Inflation Warning Shot Across Fed's Bow
US Federal Reserve Chair Kevin Warsh recently made comments at the Federal Reserve Bank of Kansas City's annual central banking event in Jackson Hole. For the first time, he acknowledged that inflation is elevated and widespread, lasting 'far too long'. He also expressed doubts about describing current financial conditions as 'restrictive', implying that the Fed's interest-rate settings may not be helping to contain inflation.
Warsh emphasized that the Fed must ensure underlying inflation is moving towards its 2% target 'clearly and at sufficient speed'. If this doesn't happen, he believes there's still work to do. Given the current inflation rate of 3.7%, above the target for around five-and-a-half years, many are expecting a rate hike in mid-September.
Warsh has faced an awkward balancing act since becoming Fed chair, dealing with pressure from President Donald Trump and growing dissent among hawkish-leaning voters on the Federal Open Market Committee. Despite these challenges, Warsh would bolster his credibility by prioritizing American households over politics.