New Fed chair Warsh asserts independence in debut global outing, signals inflation resolve
In his first appearance with international counterparts, Federal Reserve Chair Kevin Warsh said the central bank's political independence is non-negotiable and that inflation will return to 2%, pushing back against White House pressure for rate cuts.
Independence reaffirmed
Kevin Warsh used his debut at the ECB's annual policy forum in Sintra, Portugal, to draw a bright line between the Federal Reserve and day-to-day politics. He noted the institution's long history of autonomy and promised no change.
The comments follow a Supreme Court ruling this week that blocked President Trump from firing Fed governor Lisa Cook, which Warsh said underscored the Fed's ability to follow its remit regardless of political pressure.We've been an independent central bank for a very long time. We're going to be an independent central bank at this moment and you're going to see no changes to that.
Inflation outlook
Warsh said inflation risks have eased since he took over as chair in late May.
The Fed's preferred inflation gauge is running above 4%, while underlying measures that strip out food and energy remain high. A preliminary U.S.-Iran ceasefire deal recently pushed oil prices back to prewar levels, but the central bank's 2% target remains distant.Expectations of inflation over the first four weeks of this period, they've come down. Inflation risks have come down.
No forward guidance
Consistent with his long-standing opposition to forward guidance, Warsh declined to signal whether the Fed would raise rates at its next meeting.
He argued that pre-committing to a policy path risks boxing the central bank in if economic conditions change. Wall Street currently expects the key rate could rise from 3.6% to about 3.9% as soon as September.I'm not going to make a judgment now.
Political crosscurrents
Warsh's stance puts him at odds with the White House. Trump adviser Kevin Hassett recently hinted at little patience for rate increases, and the president has repeatedly called for lower borrowing costs. Warsh himself had advocated for lower rates last year while campaigning for the chairmanship, but has shifted focus toward price stability since taking office on May 22.
Communications shake-up
Separately, Warsh named former Bank of England Governor Mervyn King to co-chair a new communications task force, signaling that overhauling how the Fed speaks to markets is a key plank of his leadership.
