Warsh Warns of Inflation but Fails to Provide Clear Plan

The Federal Reserve Chairman Kevin Warsh emphasized that inflation is his top priority in a recent speech at Jackson Hole. He stated that responsibility for '65 months of sustained, elevated inflation sits squarely with the central bank,' but declined to explain what steps he plans to take to address it.

According to the latest numbers, July CPI inflation reached +3.4% year-over-year, while July PCE and Core PCE both came in at +3.7% and +3.3%, respectively. Warsh highlighted that 54% of individual goods and services categories in the PCE basket logged annual price gains above 3%, exceeding the pre-pandemic norm of about 32%. Despite this, he offered no specific plan for addressing the issue.

Warsh's stance on inflation is nuanced, as he also noted that lending standards and credit spreads are a concern. He stated that 'On balance, I would be hard pressed to describe financial conditions as restrictive,' which could suggest that further rate hikes may not be necessary.