Fed Chair Kevin Warsh on the Rate Hold, Inflation Path and What Comes Next

After the Federal Reserve kept interest rates unchanged, Chair Kevin Warsh spoke live and took questions from reporters, offering a detailed readout of the committee's thinking on inflation, policy strategy and market conditions. Warsh said the conversation with the press was cordial and emphasized that the U.S. economy has shown "impressive resilience." He reiterated that policymakers do not provide forecasts and said the central bank remains focused on price stability, rejecting the idea of a flexible inflation target. "Our sole target is an inflation rate of 2%," he said. He argued that elevated inflation over the past five years has created a "remarkable and difficult-to-resolve situation," adding that the Fed's implicit target can appear above 2% and that inflation cannot be fixed in "nine weeks." He said the pullback in forward guidance may already be affecting market behavior and stressed the Fed "will not hesitate to take action when necessary and appropriate." Warsh said investors have learned to "cooperate rather than act as arbitrators" and pointed to artificial intelligence investment as a foundation for future growth. He also said the Fed held a "heated debate" focused on four areas: persistently high inflation over the past five years; an assessment of recent economic shocks; price increases driven by those shocks; and the policy tools and strategies available. On market conditions, Warsh said officials are monitoring the rise in bond yields and are trying to "stay away from it." He added the decision was supported by a large majority and said dissenting votes did not reflect the essence of the internal debate. Warsh downplayed the likelihood that June core CPI would materially change policy, but said the Fed will closely track inflation data in the period ahead. He said some inflation readings have been encouraging and will be watched closely over the next few days, adding that officials will face important decisions soon. He noted that interest rates are higher now than they were 42 days ago. He pushed back on the notion that nudging the inflation target higher would make the Fed "more flexible," insisting the central bank will reach 2%. He added that if inflation stays elevated, interest rates could be part of the solution. He also said the Fed is focused on the underlying inflation dynamics associated with shocks and on assessing how much those shocks worsen inflation. Warsh also challenged the framing of the decision as simply leaving rates unchanged, arguing that financial markets could interpret it in the opposite direction. He said it is reassuring that markets are reacting to real-time developments rather than the Fed itself or the dot plot. He reiterated that personal consumption expenditures (PCE) inflation remains the Fed's key reference. Related update: The Federal Open Market Committee (FOMC) voted 9–3 to keep the federal funds rate at 3.50–3.75%. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan dissented, calling for a 25-basis-point increase to fight inflation. The post-meeting statement said three members favored raising the target range by a quarter point, a sign that support for higher rates is strengthening inside the committee. All three argued that tighter policy is needed with inflation running above the Fed's 2% goal for more than five years. Hammack and Logan said households remain under pressure from persistently high prices, while Kashkari said stronger steps are needed to ensure price stability. This is not investment advice.