In a speech, Federal Reserve Board Chair Kevin Warsh argued that inflation should be the Federal Reserve’s predominant near-term focus and called for more limited use of forward guidance in normal times. He did not signal a specific interest rate decision, instead emphasizing a firm 2 percent personal consumption expenditures inflation target, reliance on short-term rates as the main policy tool and flexibility to respond to changing conditions. Warsh assessed the economy as strong, with stable labor markets consistent with full employment and broad financial conditions that are difficult to characterize as restrictive. However, 12-month PCE inflation was 3.7 percent and six-month inflation was 4.1 percent, while recent better-than-expected readings had not materially improved the underlying trend. He said policy must ensure that underlying inflation is moving clearly and sufficiently quickly toward 2 percent. On communications, Warsh said routine forward guidance can constrain policymakers and distort the information exchanged between markets and the central bank. He favored a quieter, more purposeful Federal Reserve and noted that a productivity and jobs task force is examining artificial intelligence’s longer-term economic effects, although its later recommendations will not affect current policy decisions.
2026-08-28Federal Reserve Board
Federal Reserve Board Chair Warsh prioritizes inflation and seeks to limit forward guidance
Federal Reserve Board Chair Kevin Warsh said inflation should remain the Fed’s main near-term focus, with PCE inflation still well above the firm 2 percent target despite a strong economy and stable labor market. He did not signal a rate decision but called for less forward guidance, greater policy flexibility and primary reliance on short-term interest rates.