Fed Chair Warsh Keeps Inflation Focused, Says More Action May Be Needed

US Federal Reserve Chairman Kevin Warsh on Friday placed inflation at the forefront of monetary policy during his keynote address at the annual Jackson Hole symposium. Warsh emphasized that the central bank must be confident that underlying price pressures are moving towards its two percent target at a sufficient pace, or further policy action may be necessary.

Inflation remains the Fed's primary focus, as it is above the target and better-than-expected readings during the summer did not convince Warsh that underlying inflation trends have significantly improved. The Fed's 2 percent inflation objective, measured by the Personal Consumption Expenditures price index, remains a firm fixed target, and delivering stable prices is the central bank's responsibility.

Warsh stopped short of signaling the Fed's next interest-rate decision, stating that he is committed to a disciplined approach rather than a specific decision. The US economy assessment was strong, with business capital expenditure rising rapidly, consumer spending remaining healthy, and the unemployment rate at 4.1 percent, indicating broad full employment.

Warsh also criticized routine forward guidance from the Fed, saying it had outlived its purpose during normal times and could constrain policymakers when economic conditions change. During the July meeting, Warsh indicated that a "good majority" of policymakers preferred to wait for more information before deciding on a change in interest-rate policy, while remaining ready to act as circumstances required.