Fed Chairman Warsh says inflation is running too high, offers first assesment of economy

Federal Reserve Chairman Kevin Warsh warned on Friday that inflation remains too high, signaling it should be the central bank's primary concern. In his first speech as chairman at the Jackson Hole economic symposium in Wyoming, Warsh provided a strong assessment of the economy, although he refrained from offering forward guidance.

He emphasized the importance of ensuring underlying inflation moves to the Fed's 2% objective at a sufficient pace. Warsh stated that the Federal Reserve's job is to deliver stable prices, and market measures of inflation expectations are crucial. While he did not indicate that rates are holding back the economy, he suggested that financial conditions are not restrictive.

Warsh pointed to robust economic growth, noting that capital expenditures have surged by 9% over the past four quarters, driven significantly by artificial intelligence. Consumer spending, adjusted for inflation, has increased more than 2% in the past four quarters. The S&P 500's profits are also elevated relative to historical norms.

Warsh maintained that the US job market is "quite stable," consistent with full employment. He reiterated the Fed's commitment to watching market signals closely but reiterated his pledge to withhold any guidance on the future path of monetary policy.