Fed Chair Warsh: "Will Not Tolerate High Inflation," Declares "Mission Not Accomplished" Despite CPI Slowdown

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.

While reaffirming the principle that price stability remains the top priority, he did not provide specific comments regarding the necessity of further interest rate hikes.

Regarding pressure from U.S. President Donald Trump to lower interest rates, Warsh made it clear that he would uphold the independence of the Federal Reserve.

Appearing before the House Committee on Financial Services for a hearing that day, Chair Warsh stated, "The Federal Reserve's primary goal is to conduct monetary policy correctly," adding, "The members share a firm commitment to not tolerating persistently high levels of inflation and to restoring price stability."

"We will conduct our policy correctly, and the inflation surge of the past five years will become a thing of the past," Warsh added.

He emphasized that the inflation that has exceeded target levels over the past five years has acted as a "tax" on the American public and businesses, necessitating a shift in policy.

Regarding the Bureau of Labor Statistics' announcement earlier that day that U.S. consumer inflation had slowed faster than expected, he cautioned that it was too early to be relieved, drawing a line against declaring "mission accomplished."

The U.S. Consumer Price Index (CPI) for June, released that day, rose 3.5% compared to the same month last year. This rate was a slowdown from May (4.2%) and came in below the 3.8% forecast by experts surveyed by Dow Jones.

Addressing the slowdown in CPI, Chair Warsh emphasized, "Some might look at this and say, 'mission accomplished,' but I think differently," adding, "We have work to do on inflation."

However, Chair Warsh did not specifically mention whether interest rate hikes or other measures were necessary to curb inflationary pressure.

He did, however, reiterate his stance that he would not compromise the Fed's independence in response to President Trump's pressure to cut rates.

When asked about a scenario where President Trump or his aides might target him with pressure regarding monetary policy, he replied, "The courts have already answered that question," adding, "I will continue to do my job."

This was a reference to the recent Supreme Court ruling that blocked President Trump's attempt to remove Fed Governor Lisa Cook, effectively reaffirming the need to maintain the Fed's independence.

When asked if he works for President Trump, he replied, "We are independent, and we are proud to be independent."

Responding to a question about how he would react if President Trump exerted pressure in a direction contrary to the data, Chair Warsh said, "I promise to follow the law, follow the data, and make the best possible judgment."

Regarding the reform of the Federal Reserve, he projected that results would be available by the end of the year.

Upon taking office, Chair Warsh formed task forces (TFs) in five areas, including the balance sheet and communication systems.

Chair Warsh stated that if there are any changes to balance sheet policy, they will be sufficiently announced and explained in advance.

"There will be no changes to balance sheet policy without proper prior notification to this committee and the financial markets at large," Chair Warsh emphasized.

He has previously expressed the view that the Fed'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, Chair Warsh said, "I believe that being a bit more cautious is, at least for me, a better way to call 'balls and strikes.'"

He added, "Changes to the communication system will not be for the purpose of hiding information."

At the Federal Open Market Committee (FOMC) meeting he chaired for the first time last month, Chair Warsh eliminated forward guidance regarding future policy direction and did not submit interest rate projections.

Meanwhile, Chair Warsh identified corporate investment in artificial intelligence (AI) as the "most prominent feature" of the current economic situation, noting, "This rapid pace reflects massive demand for AI-related equipment and software."

However, regarding the impact of AI investment on the economy, he assessed, "We do not know to what extent the economy will benefit from the expansion of AI infrastructure."

Chair Warsh has previously expressed the view that productivity gains from AI development would act as a factor in slowing inflation in the future.

The Fed Chair appears before Congress twice a year to explain monetary policy, and this was Chair Warsh's first appearance at a congressional hearing.

(Photo: AP, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.