Fed Chair Warsh Sees Inflation Easing, but Still Too High for Comfort
WASHINGTON — New Federal Reserve Chair Kevin Warsh on Wednesday signaled a nuanced shift in the central bank's inflation outlook, saying that while price pressures remain uncomfortably high, the threat they pose to the economy has diminished. Speaking at a European Central Bank forum in Sintra, Portugal, Warsh reiterated the Fed's unwavering commitment to its 2% inflation target and its independence from political interference.
“If there were people in households, or in the business sector, or in the financial markets who thought this central bank was going to be comfortable with an inflation objective above 2%, well, I guess they’d be disappointed,” Warsh said. “We’re going to deliver price stability in the U.S.”
The remarks came just two weeks after his similarly hawkish inaugural press conference as Fed chair, and they stand in sharp contrast to his earlier calls for lower rates before taking the helm — as well as President Donald Trump’s repeated demands for aggressive rate cuts. Warsh acknowledged that “prices are too high,” but he tempered his tone by noting that inflation expectations have fallen in recent weeks, thanks in large part to a plunge in oil prices following a ceasefire in Iran. He also suggested that the artificial intelligence boom could boost productivity over time, potentially easing inflationary pressures in the longer run.
“We've all looked around, and we've seen that prices are too high,” Warsh said. The Fed’s preferred inflation gauge — the personal consumption expenditures (PCE) index — rose to 3.4% in May, the highest reading in nearly three years.
Warsh’s comments offered a carefully calibrated message: hawkish on the need to finish the fight against inflation, but open to the possibility that some disinflationary forces are building. “The risk of inflation staying too high has probably diminished relative to a few months ago,” he suggested, without specifying a timeline for rate cuts.
When pressed on Trump’s public push for lower borrowing costs, Warsh was blunt in defending the Fed’s institutional autonomy. “We've been an independent central bank for a very long time,” he said. “We're going to be an independent central bank at this moment, and you're going to see no changes on that.”
Beyond inflation, Warsh used the forum to deliver a broader message about central bank communication. He repeatedly refused to offer “forward guidance” on rate moves — a break from the more explicit signaling under his predecessors. “Central bankers should talk less, not more, about their future plans,” Warsh said, a position that won backing from his fellow panelists: ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, and Bank of Canada Governor Tiff Macklem.
The Fed’s next policy meeting is set for July 28–29. According to fed funds futures, markets currently see a better than 70% probability that the committee will hold rates steady this month, but about a 50% chance of a rate hike at the September 15–16 meeting — reflecting ongoing uncertainty about whether inflation can be tamed without derailing growth.
Background analysis: Warsh’s remarks come at a delicate moment for the U.S. economy. While headline inflation has eased from its 2022 peak, core services prices remain sticky, and strong consumer spending is keeping pressure on the Fed. At the same time, geopolitical risks and a potential slowdown in global trade are complicating the outlook. Warsh’s balancing act — acknowledging progress while vowing vigilance — suggests the Fed will remain data-dependent and cautious, even as political heat intensifies.