Warsh Refuses to Harm Labor Market for Inflation Fight

On Wednesday, the Federal Reserve raised its benchmark rate by a quarter percentage point to 3.75% to 4%. This move was widely anticipated and reported on extensively. However, what many outlets missed was Kevin Warsh's response to a question from Jennifer Schonberger of Yahoo Finance about whether the Fed needs to push growth below potential and harm the labor market to bring down inflation.

Warsh's answer was clear: 'I don't believe that we need to do harm to the labor markets to achieve our objective, according to Federal Reserve. I don't believe that the two parts of our mandate, price stability and full employment, are working at cross purposes over the medium term.'

This statement is significant because it suggests that Warsh does not accept employment damage as the price of bringing down inflation. This departure from previous Fed chairs' views on monetary policy has been noted by UBS's economist Jonathan Pingle.