Kevin Warsh Notes Inflation Concerns But Offers No Clues as to Next Fed Decision

New Federal Reserve Chairman Kevin Warsh did not tip his hand Friday about whether an interest rate hike is on the horizon but did voice concerns about a continued trend of higher inflation.

“I stand here today committed to a discipline, not to a decision,” Warsh said in prepared remarks at the central bank’s annual symposium in Jackson Hole, Wyo. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.”

Warsh, who assumed the Fed leadership post in June from Jerome Powell, stressed Friday that the Federal Open Market Committee (FOMC) remains committed to keeping its 2 percent annual inflation rate as a target. He said that  recent personal consumption expenditures and the consumer price index have performed “better than expected,” but also noted that underlying inflation trends have not “meaningfully improved.” 

The FOMC maintained its benchmark interest rates at between 3.5 percent and 3.75 percent during Warsh’s first two meetings. Warsh has sought to change the Fed’s long-standing forward-guidance policy often used by markets when interpreting the central bank’s data, a position he re-emphasized Friday. 

“We determine the path of short-term interest rates, and market participants will always try to anticipate what we will do next,” Warsh said. “But we should not indulge a regime in which market participants are looking primarily to the Fed for their next trade.”

The FOMC’s next meeting is scheduled for Sept. 15-16. Markets have priced in about a 50 percent chance of a rate hike based on Investing.com’s latest Fed rate monitor tool. 

Andrew Coen can be reached at acoen@commercialobserver.com.