Warsh Signals Potential Inflation Action as Progress Stalls

Fed Chairman Kevin Warsh cautioned that inflation progress has stalled, signaling potential action from the central bank. Speaking at Jackson Hole, Wyoming, Warsh stated that 'we must be confident that underlying inflation is moving to our objective clearly and at sufficient speed' or else 'we have work to do.'

The Fed's preferred inflation gauge, the PCE index, rose 3.7% over the 12 months ending in July, with core measures remaining elevated. Warsh noted that while summer trends in personal consumption expenditures (PCE) and consumer price index (CPI) were 'better than expected,' they did not indicate meaningful improvement.

Warsh has begun to institute reforms since succeeding Jerome Powell as Fed chair in May, including the elimination of forward guidance from policy announcements. He views this move as a necessary step to reset expectations between the central bank and financial markets.