Speaking at the Kansas City Fed’s Jackson Hole symposium, Warsh described persistent inflation as “concerning” and said price pressures were currently a greater concern for policymakers than the labour market, which he described as broadly strong.
Warsh said inflation indicators were showing a similar pattern, with price growth remaining above the Federal Reserve’s 2% target. He stressed that the Fed’s main focus should currently be on controlling inflation.
The Fed chair said the central bank had missed its 2% inflation target for 65 consecutive months. He warned that if underlying inflation does not show clear and sufficiently rapid progress towards the target, the Federal Reserve would have “work to do”.
US interest rates are currently in the 3.5% to 3.75% range, and Warsh’s remarks signalled that further rate increases could be considered if inflation remains elevated.
Warsh also said there were few signs that current interest rates were significantly restricting US economic growth. He noted that financial conditions, on balance, could not be described as restrictive.
The comments come after investors sought greater clarity from Warsh on whether he would support higher interest rates following the Federal Open Market Committee’s July meeting.
Warsh previously served as a Federal Reserve governor from 2006 to 2011 and was regarded as relatively hawkish on inflation. His appointment by President Donald Trump, who has repeatedly called for lower borrowing costs, had raised questions among investors about the Fed’s approach to inflation.
Warsh reaffirmed the Federal Reserve’s commitment to its 2% inflation target, measured by the Personal Consumption Expenditures price index, calling it a “firm, fixed target”. The PCE inflation rate currently stands at 3.7%.
