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."
Warsh returned to that pledge repeatedly during three hours of testimony before the House Financial Services Committee where he faulted the central bank for inflation running above its 2% target for the past five years.
No Mission Accomplished
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 told lawmakers he didn't want to take too much comfort or concern from any one data release. "There might be some who look at this morning's data and say, 'Well, mission accomplished, everything is swell.' That is not my view," he said.
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 avoided laying out 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.
Avoiding the Guidance Trap
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 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 as his predecessors did, Warsh 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. It's not the way to do things," he said. "Being somewhat more circumspect is a better way of calling balls and strikes."
Pledging Independence
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 and that political pressure crept in because the central bank spent five years missing its inflation target.
Under questioning from lawmakers in both parties, Warsh promised to set interest rates without taking political factors into account.
The 'Family Fight'
That tension could build if Warsh or his colleagues conclude that delivering on the repeated pledge requires higher interest rates.
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 such 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 around 3% or higher, depending on the gauge.
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 if inflation doesn't make sustained progress. "Sternly staring at inflation until it melts before our withering gaze is not an option," he said.
A 'Reform Agenda'
Warsh also explained his agenda to overhaul how the Fed evaluates the economy, communicates with the public, and approaches policy-setting decisions, with five task forces led by outsiders named by Warsh last week.
Warsh pushed back against concerns that the task forces or a pullback in public communications would lead to less transparency or accountability. Those task forces would report their findings first to the Fed's rate-setting committee, but the work would also be shared with the public, he said. "There's going to be nothing held in secret here,"
One of the task forces will evaluate the potential for new technologies, including AI, to inform central-bank thinking. Warsh devoted more attention to the AI build-out than any other feature of the economy throughout his testimony, highlighting the potential for it to boost growth without necessarily raising inflation.
But he also called for humility. "The long term can be quite far out, and we've got to monitor things month-to-month, quarter-to-quarter as we get there," he said.
Write to Nick Timiraos at Nick.Timiraos@wsj.com
-- Photo by Chip Somodevilla/Getty Images.
(END) Dow Jones Newswires
July 14, 2026 15:51 ET (19:51 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments