Federal Reserve Chairman Kevin Warsh told lawmakers on Tuesday that the central bank will not tolerate inflation that remains persistently high, reaffirming the Fed's priority of restoring price stability.
Delivering the Board's semiannual Monetary Policy Report in his first appearance before the House Financial Services Committee, Warsh reiterated the Federal Open Market Committee's recent decision. The FOMC kept the target range for the federal funds rate at 3-1/2 to 3-3/4 percent at its June meeting.
"The members of our Committee have no tolerance for persistently elevated inflation," Warsh said. "And we share a resolute commitment to restoring price stability."
Warsh acknowledged the burden that elevated inflation has placed on American households and businesses over the past five years. He emphasized that while month-to-month price swings are to be expected, the path of underlying inflation over longer horizons is largely shaped by monetary policy actions.
On the economic backdrop, Warsh described overall expansion as solid and resilient. Household consumption growth was characterized as moderate, and manufacturing output has risen steadily this year. In contrast, he noted that the housing sector continues to lag behind other areas of the economy.
One of the most notable features Warsh highlighted was the rapid pace of business investment. He said that investment activity appears to be accelerating, citing construction of data centers and strong demand for AI-related equipment and software as drivers. On a measured basis, investment in equipment rose by about 8 percent for the year ending in the first quarter, while high-tech spending increased nearly 25 percent on a four-quarter basis.
Turning to labor market conditions, Warsh described the situation as broadly stable. Job creation has kept pace with growth in the labor force, the unemployment rate remains low and has changed little over the past year, and the economy has experienced relatively few layoffs. He also pointed to only slight variation in job vacancies and solid growth in nominal wages.
To examine and potentially refine the Fed's own operations and frameworks, Warsh announced the creation of five task forces. These groups will review the central bank's communications, balance sheet policies, data sources, the productivity and jobs impacts arising from new technologies, and inflation frameworks.
Warsh's testimony combined a firm stance on inflation with an assessment of an economy showing varied momentum across sectors and a labor market that remains resilient. The announced internal reviews signal a deliberate effort to scrutinize both policy tools and the information that informs them.