New Federal Reserve Chair Kevin Warsh delivered his first testimony before the U.S. House of Representatives Committee on Financial Services, presenting an optimistic economic assessment while emphasizing the central bank's commitment to price stability. Warsh stated the Fed has 'no tolerance for persistently elevated inflation' and pledged to end the inflation surge of the last five years through correct monetary policy. The testimony focused on the price stability component of the Fed's dual mandate, with Warsh declaring that getting monetary policy right is the institution's 'number one objective.'
Fed Chair Declares Zero Tolerance for Elevated Inflation
Warsh told the Committee that 'the Fed's number one objective is to get monetary policy right---or as near to it as we possibly can,' describing it as 'our clear and constant aim, the star we steer by.' He asserted that if the Fed gets policy right, 'the inflation surge of the last five years will be a thing of the past.' The Fed chair acknowledged that monthly price fluctuations are inevitable but emphasized that 'underlying inflation over longer time horizons is determined largely by monetary policy.' Warsh stated that FOMC members 'have no tolerance for persistently elevated inflation.'
Economic Activity Expands with Surging AI-Related Business Investment
Warsh characterized the U.S. economy positively, saying 'economic activity is expanding at a solid pace' with 'household consumption growth is moderate' and manufacturing output that 'has moved up steadily this year.' He noted the housing sector 'continues to lag.' The Fed chair described surging business investment as 'the most striking feature of the economy right now,' stating the rapid pace 'appears to be accelerating' and 'reflects, in large part, the construction of data centers and the immense demand for the AI-related equipment and software that fill them.' Warsh said the Fed is 'monitoring the implications for inflation and the labor market.'
Labor Market Remains Stable with Low Unemployment
Warsh reported that productivity growth has been strong, with that strength beginning 'before the current gains from AI adoption.' He stated 'America's labor market appears broadly stable' with job creation keeping 'pace with the workforce.' The Fed chair said 'the unemployment rate is low and has changed little over the past year,' adding that 'we're seeing relatively few layoffs, only slight variance in the rate of job vacancies, and solid growth in nominal wages.'
Warsh Appoints Five Task Forces to Review Monetary Policy
The Fed chair referenced five task forces he appointed to explore ways to improve the conduct of monetary policy. Warsh stated 'we have a duty to point the institution forward---to take a fresh look at current practices to make sure we are serving our objectives.' He explained 'the purpose here is to equip the Fed to make better decisions in monetary policy and to put these years of high inflation behind us.'
FAQ
What did Fed Chair Kevin Warsh say about inflation in his Congressional testimony?
Warsh told the House Financial Services Committee that FOMC members 'have no tolerance for persistently elevated inflation' and pledged to end the inflation surge of the last five years through correct monetary policy. He stated that underlying inflation over longer time horizons is determined largely by monetary policy.
What is driving the current surge in business investment according to Warsh?
Warsh described surging business investment as 'the most striking feature of the economy right now,' attributing the rapid pace to the construction of data centers and immense demand for AI-related equipment and software that fill them. He noted the Fed is monitoring the implications for inflation and the labor market.
