Warsh Warns: Elevated Inflation a Top Concern for Federal Reserve

Kevin Warsh, a Federal Reserve member, has given some insight into his thoughts on inflation and monetary policy in a recent speech. He emphasized that the Fed's primary focus should be on price stability, as inflation is currently above the target rate of 2%. The preferred measure of inflation, the PCE price index, stands at 3.7% for the 12-month change, while the six-month change is 4.1%, according to Warsh.

Warsh also acknowledged that the employment side of the Fed's mandate is doing well, but noted that it is not a primary concern at this time. He emphasized that the responsibility for sustained elevated inflation sits squarely with the central bank, and that the Fed will take its responsibility seriously in addressing this issue.

In terms of future policy, Warsh stated that the Fed should not indulge a regime where market participants look primarily to the Fed for their next trade. He also highlighted the importance of avoiding overcommitting to future decisions, as it can lead to ambiguity and create uncertainty in markets.