▲ Federal Reserve Chair Kevin Warsh
Kevin Warsh, Chair of the U.S. Federal Reserve, expressed his determination on July 14 (local time) not to tolerate persistently high levels of inflation.
This reaffirms his existing principle of prioritizing price stability and suggests that future interest rate policies will be determined primarily by whether inflation slows down.
He also reiterated his stance on maintaining the independence of the Federal Reserve, despite pressure from U.S. President Donald Trump to lower interest rates.
During his appearance at a hearing of the House Committee on Financial Services that day, Chair Warsh stated, "The Federal Reserve's primary goal is to get monetary policy right, or as close to right as we possibly can." He added, "We will get the policy right, and the surge in inflation over the past five years will be a thing of the past."
Regarding the Federal Open Market Committee (FOMC) meeting he chaired last month after taking office, Warsh emphasized, "My fellow colleagues and I recognize that high inflation has placed an undue burden on American households and businesses. Our committee shares a firm commitment to not tolerate persistently high levels of inflation and to restore price stability."
When asked at the hearing how he would respond if President Trump exerted pressure in a direction contrary to the data, Warsh replied, "I will make a commitment to follow the law, follow the data, and make the best judgment possible."
This response appears to be mindful of the controversy surrounding potential threats to the Fed's independence due to President Trump's pressure to cut interest rates.
When asked about what he would do if President Trump or his staff targeted him while pressuring him on monetary policy, Warsh said, "The courts have already answered that question," adding, "I will continue to do my job."
This refers to the recent Supreme Court ruling that blocked President Trump's attempt to remove Fed Governor Lisa Cook, effectively reaffirming the necessity of maintaining the Fed's independence.
"My goal at the Federal Reserve is to keep politics out of it," Warsh said. "If there is politics operating internally, I will remove it."
Chair Warsh also stated that he would provide sufficient advance notice if there were any changes to balance sheet policy.
"If there are changes to balance sheet policy, we will announce, explain, and discuss them in advance," Warsh said. "There will be no changes to balance sheet policy without properly informing this committee and the financial markets at large beforehand."
Warsh has previously expressed the view that the Federal Reserve's balance sheet has become bloated due to quantitative easing policies implemented to overcome economic crises and needs to be reduced.
Regarding the Fed's communication system, Warsh said, "I think being a little more cautious is, at least for me, a better way to call 'balls and strikes'."
He added that changes to the communication system would not be intended to withhold information.
At last month's FOMC meeting, Chair Warsh eliminated forward guidance regarding future policy directions and did not submit interest rate projections.
While stating that it is not the Federal Reserve's job to definitively grasp the ripple effects of artificial intelligence (AI), Warsh predicted that the United States would be the winner in the AI development race.
He added, however, that it is difficult to predict long-term conditions and that close monitoring is necessary.
The Federal Reserve Chair appears before Congress twice a year to explain monetary policy.
This was Chair Warsh's first appearance at a congressional hearing.
(Photo: AP, Yonhap News)
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