Federal Reserve Chair Kevin Warsh told Congress on Tuesday that the central bank will make high inflation “a thing of the past,” but he gave no clear answer on whether the Fed is finished raising interest rates.
In his first appearance before lawmakers since taking over the Fed on May 22, Warsh struck a firm tone on inflation. According to Fortune, Warsh said Fed policymakers “have no tolerance for persistently elevated inflation” and share “a resolute commitment to restoring price stability.”
Fed Deeply Divided on Next Steps for Rates
Despite his strong words, Warsh did not signal whether the central bank plans to raise rates again, hold steady, or begin cutting. The reason, according to reports, is a sharp divide within the Fed’s rate-setting committee.
About half of the 19 policymakers penciled in higher interest rates by the end of the year in forecasts released last month. The other half signaled they support keeping rates unchanged or even cutting them, as reported by Fortune. Warsh now faces the challenge of uniting a deeply split committee.
Warsh Declines to Say Whether Rates Will Rise at Next Meeting
The uncertainty extends to the Fed’s next meeting. According to The New York Times, Warsh declined to say on Wednesday whether the Fed would consider raising rates at its next meeting at the end of the month. This leaves markets and the public guessing about the central bank’s near-term plans.
Trump Pressure Looms Over Fed Decisions
Adding to the complexity, the Fed faces external pressure from the Trump administration, which has publicly sought rate cuts to boost the economy. Reports indicate the Warsh-led Fed is in no hurry to resume raising rates, even as inflation remains above the central bank’s 2% target, as noted by Washington Examiner.
Warsh has told lawmakers the central bank will take the steps needed to preserve price stability, according to Fox Business. But he has not said whether those steps include more rate hikes.
Our Take: Warsh’s Silence Leaves Markets in the Dark
Kevin Warsh is sending a clear message on inflation — the Fed will not tolerate it. But his refusal to say whether the Fed is done raising rates is a problem. Markets need clarity to plan and invest. When half the committee wants higher rates and the other half wants cuts, the chair’s job is to provide direction. So far, Warsh is not doing that. Add in pressure from the White House, and the Fed looks more divided than decisive. In our view, Warsh needs to pick a lane — soon — or risk losing credibility with both Congress and the public.
