WASHINGTON -- Chairman Kevin Warsh pledged to lawmakers on Tuesday that the Federal Reserve will bring inflation down, saying members of its rate-setting committee "have no tolerance for persistently elevated inflation."
He delivered the vow on the same morning that the Labor Department reported that consumer prices fell in June, and that closely watched "core" prices, which exclude food and energy, didn't rise at all. The report should be enough to temper anxieties about inflation that had led some of his colleagues to suggest a rate increase should be on the table at the Fed's meeting in two weeks.
Warsh said little about his views on interest rates, in keeping with his stated view that the Fed shouldn't telegraph its next move. His testimony to the House Financial Services Committee didn't outline a standard for judging when elevated inflation becomes persistent.
Instead, he described the Fed's objective as singular and its success as assured. "If we get policy right -- and we will -- the inflation surge of the last five years will be a thing of the past," he said.
Pressed by lawmakers on how he intends to deliver, Warsh gave an answer that highlighted the tensions facing central bankers. He acknowledged that much of what is pushing up prices lies beyond the Fed's reach, including "conflicts overseas and the rest," he said. "We can't have and shouldn't have direct control on that."
But the Fed still owns the result, he said. "Inflation's a choice, meaning monetary policymakers need to choose lower prices." He said that the central bank had the tools to deliver by adjusting interest rates or the size of its asset portfolio and that this wasn't the moment to "pass it off to blame others."
Asked why he has declined to spell out how he would respond to changing conditions in the manner that his predecessors did, Warsh said the risk is to the Fed's own judgment. "We're human," he said. If policymakers offer their economic projection, "we'd then find ourselves sort of taking information that's consistent with our priors and rejecting information that's inconsistent. Being somewhat more circumspect is a better way of calling balls and strikes."
Warsh called the labor market "broadly stable" with few layoffs and solid wage growth. He highlighted strong growth in labor productivity, or output per hour worked, a development that can allow the economy to grow faster without generating inflation.
He devoted more attention to the AI build-out than any other feature of the economy, highlighting brisk investment spending that he said appears to be accelerating. "New opportunities for the economy introduce new challenges for policymakers. We at the Fed are monitoring the implications for inflation and the labor market," he said.
A growing number of officials had indicated higher rates could be warranted in the coming months if inflation pressures didn't recede soon. Last year, the Fed cut rates three times out of concern the labor market was weakening. However, no slump arrived: Hiring steadied, unemployment barely moved, and the weakness officials feared faded.
In its place came price pressures from three directions at once -- tariffs on imported goods, the energy and commodity disruptions of the Iran war, and the AI build-out -- leaving the Fed with a resilient economy and inflation stuck between 3% and 4%.
Fed governor Christopher Waller, who led the charge for last year's cuts, said on Monday he saw a "credible case" for inflation to improve in the coming months but that a rate increase should be on the table at the July 28-29 meeting if Tuesday's report pointed to firm price pressures.
"Sternly staring at inflation until it melts before our withering gaze is not an option," he said.
Warsh, a Fed governor from 2006-2011, arrived at the central bank in May. In the preceding year, President Trump brought unprecedented pressure on the central bank, including public demands for lower rates, an attempt to fire governor Lisa Cook, and a Justice Department criminal investigation of his predecessor, Jerome Powell.
Trump considered Warsh for the job in 2017 but picked Powell. He quickly soured on the choice and last year said publicly he wouldn't consider anyone for the job who didn't agree with him on the rationale for lower interest rates.
Warsh's unqualified vow to deliver on low inflation speaks to that history. He has argued that the Fed's independence is earned by delivering on its promises rather than conferred by law, and that political pressure crept in because the central bank spent five years missing its inflation target.
Write to Nick Timiraos at Nick.Timiraos@wsj.com
(END) Dow Jones Newswires
July 14, 2026 11:50 ET (15:50 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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