New Federal Reserve Chairman Kevin Warsh is heading to Capitol Hill this week to testify before Congress regarding the state of economic policy and the wider U.S. economy. Markets should not expect the two-day hearings to provide much new insight into the central bank’s next move.
Warsh will testify before the House Financial Services Committee on Tuesday at 10 a.m. Eastern and then appear in front of the Senate Banking Committee on Wednesday. The head of the Fed is required to provide Congress with a monetary policy report twice a year, though the first appearance wasn't scheduled under outgoing chair Jerome Powell.
Lawmakers are expected to give Warsh a warm welcome, likely keeping contentious exchanges to a minimum.
But with Warsh declaring at his first two public appearances that he will not provide signals about the timing or direction of the Fed’s next move, investors should not expect him to stray from his policy of no forward guidance this week.
The Federal Open Market Committee has maintained the target range for the federal funds rate at 3.5% to 3.75% since the beginning of the year. During the June meeting, nine policymakers penciled in at least one rate hike by the end of the year, though eight saw rates remaining steady throughout the year and one member still saw a cut. Warsh did not provide any forecasts. The CME Group's FedWatch currently pegs the odds of at least one hike this year at 87%.
On the inflation front, markets will be listening for how Warsh characterizes the current state of price growth.
Inflation has been above the Fed’s 2% target for more than five years, and Warsh previously vowed to deliver price stability at the FOMC’s June press conference. But while participating in a panel discussion at the European Central Bank Forum in Sintra, Portugal, Warsh said that “inflation expectations have come down, and inflation risks have come down.”
Following the cease-fire between the U.S. and Iran, oil prices have retreated significantly, and many leading economists expect price growth will be more muted in the second half of the year, though most believe that inflation will remain significantly above target.
The Bureau of Labor Statistics has released the June CPI data on Tuesday at 8:30 a.m. Eastern.
U.S. consumer inflation slowed more than expected in June, but that will probably offer little comfort to households or rule out an interest rate increase from the Federal Reserve this year, with the conflict in the Middle East still unresolved.
The Consumer Price Index increased by a still-high 3.5% in the 12 months through June after surging 4.2% in May, which was the largest year-on-year rise since April 2023, data from the Labor Department's Bureau of Labor Statistics showed on Tuesday. The CPI fell 0.4% over the month after advancing 0.5% in May. Economists polled by Reuters had forecast the CPI rising 3.8% year-on-year and dipping 0.1% on a monthly basis.
The persistent inflation comes as the labor market has improved this year compared to the end of 2025. The Fed’s monetary policy report, released Friday, characterized the job market as “broadly stable,” with the national unemployment rate remaining at a consistently low level.
Expect lawmakers to question Warsh about the newly formed task forces that he’s asked to review a broad range of Fed functions, including communications, the balance sheet, economic data, the inflation framework, as well as productivity and jobs.
Warsh announced a diverse group of well-respected academics, business executives, and former global central bankers to help lead each committee. The selection was greeted without much criticism, largely providing some reassurance that Warsh was not using these task forces to carry out a politically-motivated agenda.
Their recommendations are expected to be released later this year, though how much change these spur remains to be seen given that the FOMC members will likely need a majority vote to adopt any substantial policy shifts. The Fed previously undertook a review of its communications strategy under Powell last year, but the committee could not come to a consensus and no changes were implemented.
Lawmakers will also likely focus on Warsh’s views on productivity and artificial intelligence. At Sintra, Warsh noted that he believed AI will cause the supply side of the economy to expand, which “has huge implications for monetary policy.”
The Fed’s monetary policy report noted that labor productivity growth was “strong,” though it only increased by 0.3% during the first quarter. Productivity growth was stronger in 2023 and 2024, particularly compared to recent trends, but that was largely the result of business investment rather than AI. Since last year, productivity growth—which measures the economic output per unit of labor—has been more muted.
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