Warsh's Past Forecasts Reveal a Policymaker Consistently Worried About Inflation

US Federal Reserve Chairman Kevin Warsh has been scrutinized for his views on inflation. A review of his past forecasts, however, reveals a policymaker who consistently worried about inflation long before it materialized.

As a Fed governor from 2007 to 2011, Warsh submitted quarterly projections for growth, unemployment, and inflation. His colleagues saw 9% unemployment as slack that would keep prices down, but Warsh disagreed. He believed the crisis had durably raised unemployment, which wouldn't hold prices down.

Warsh's views diverged from his colleagues as the 2007-09 crisis receded. When asked about the economy today, he described a problem similar to the one he faced 15 years ago: inferring aggregate supply and making judgments about productivity.

For most of the decade after Warsh left the Fed, inflation ran below expectations, not above. The unemployment rate fell steadily to 3.5% by 2020, reaching levels far below what Warsh or his colleagues thought likely. Price pressures were tame. Growth did disappoint, but Warsh attributed this to regulatory, fiscal, and trade policies that turned unfriendly to growth.