Warsh Warns Fed Focus on Inflation, Despite Robust US Economy
US Federal Reserve Chairman Kevin Warsh emphasized that the Fed's primary focus should be on inflation, as prices remain above its 2% target. Speaking at the annual Jackson Hole Economic Policy Symposium, Warsh stated, 'On the price stability side of our mandate, the numbers are more concerning.'
The Personal Consumption Expenditures (PCE) price index, a key gauge for the Fed, rose by 0.2% in July, slightly exceeding expectations. The annual inflation rate held steady at 3.7%, with core PCE inflation coming in at 3.3%. Warsh noted that while summer inflation readings were better than expected, they do not indicate a meaningful improvement in underlying trends.
Warsh also highlighted the robust picture of the broader US economy. He emphasized that the central bank will remain 'keenly focused on market internals' and performance across various sectors. Warsh pledged to continue tracking changes in the growth rates of corporate earnings and capital spending, as well as their follow-on effects on asset prices, business confidence, consumer income, and spending.
Major US stock market indexes remained little changed following Warsh's speech, while Treasury yields moved substantially higher due to the hawkish undertones regarding inflation and economic strength.