Federal Reserve Chair Kevin Warsh said Friday (Aug. 28) that inflation is still too high and suggested the central bank may have to raise interest rates in the coming months to bring it down, a clearer signal than he had sent previously about his economic outlook, according to an Associated Press report.
In his first high-profile speech at the Fed’s annual conference at Jackson Hole, Wyo., Warsh acknowledged that recent U.S. data show inflation has cooled a bit, but “they do not tell me that underlying trends have meaningfully improved.”
“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” Warsh said. “Otherwise, we have work to do.”
The Fed chair, who replaced his predecessor, Jerome Powell, on May 22, faces high stakes with his speech as questions swirl around Wall Street about his focus on fighting inflation.
Those concerns may have contributed to rising bond yields, which can increase the cost of borrowing for the government and everyone else. Yet Warsh has said he doesn’t want to provide what analysts call “forward guidance” about whether the Fed will hike or cut rates or stay on hold at upcoming meetings. He argues that it limits the Fed’s flexibility by committing it to a specific policy.
Yet some economists have argued that he could say more about his views on Fed policy without tipping his hand about future actions.
