Warsh Signals Potential for Further Fed Action Against Inflation

Federal Reserve Chair Kevin Warsh hinted that the central bank may need to take further action to combat inflation, which remains above its 2% target. Speaking at the Kansas City Fed's annual Jackson Hole symposium, Warsh emphasized that policymakers must be confident that underlying inflation is moving toward its target at a sufficient pace.

Although recent improvements in price data have reduced some pressure for a September rate increase, Warsh said these readings had not demonstrated a meaningful improvement in underlying trends. He highlighted the breadth of price increases across the economy, with about half of the items in the Fed's preferred inflation basket increasing at an annual rate above 3%, compared to roughly one-third during the two decades before the pandemic.

Warsh also noted that inflation is currently more concerning for policymakers than the labor market, which he described as broadly robust. He stopped short of committing to a specific rate decision but emphasized that his approach would focus on responding to incoming data rather than signaling specific policy decisions in advance.