Warsh Reaffirms Fed's Commitment to Price Stability

Fed Chair Warsh said policymakers remain fully committed to restoring price stability and have no tolerance for persistently elevated inflation, according to prepared remarks released ahead of his Semiannual Monetary Policy Report to Congress. Warsh added, "If we get policy right - and we will - the inflation surge of the last five years will be a thing of the past". The Fed Chair also said the US economy continues to expand at a solid pace, demonstrating resilience despite recent developments. Household consumption is growing at a moderate rate, while manufacturing output has risen steadily this year. He highlighted business investment as the economy's most notable strength, driven largely by the construction of data centers and robust demand for AI-related equipment and software. On the labor market, Warsh noted that job creation has kept pace with labor force growth, the unemployment rate remains low while nominal wages continue to post solid growth.

Fed officials were divided on the future of interest rates and discussed a range of scenarios for the evolution of the economy and monetary policy, minutes from the FOMC meeting in June 2026 showed. Participants generally assessed that upside risks to inflation remained elevated and a few commented that, in light of these developments, there was a case for raising interest rates. Most participants also pointed to scenarios in which, in the context of stable labor market conditions, inflation would remain elevated due to strong AI-related demand, the conflict in the Middle East, or the effects of tariffs. In such scenarios, almost all of these participants indicated that some policy firming would likely be warranted to return inflation to 2%. However, under their most likely economic outlook, many officials expected interest rates to end the year at or slightly below their current level. The Fed kept the federal funds rate unchanged at 3.50%-3.75% in June, in line with expectations.

Inflation risks have eased in recent weeks, but the US central bank remains committed to restoring inflation to its 2% target, Federal Reserve Chair Kevin Warsh said at the ECB’s annual Forum on Central Banking in Sintra, Portugal. Warsh stressed that delivering price stability remains the Fed's primary objective, while noting that the strategy to achieve it will continue to evolve. Warsh also underscored the Fed's independence in setting monetary policy, dismissing any suggestion that political pressure would influence its decisions. The Fed chief reiterated that the central bank will no longer provide traditional forward guidance on future interest-rate decisions, signaling a shift in its communication approach. He also declined to comment on the outlook for the upcoming policy meeting, saying decisions will be based on incoming data. Last month, the Fed held rates steady but signaled growing support among officials for additional hikes later this year as inflation remains elevated.