Fed's Warsh Prioritizes Inflation, Avoids Forward Guidance at Sintra

New Federal Reserve Chair Kevin Warsh struck a hawkish tone at the ECB's Sintra forum, insisting the central bank's primary focus is price stability despite inflation running at 4.2%. Warsh reiterated the Fed's independence from political pressure and refused to offer forward guidance on interest rates.

Hawkish Stance

Warsh declared that anyone expecting the Fed to tolerate inflation above 2% "would be disappointed," vowing to guarantee price stability Source: elpaises. This marks a shift from his earlier campaign for lower rates, as the reality of war-driven energy costs and AI investment has complicated the outlook Source: elmundoes.

Independence and Forward Guidance

Warsh firmly said the Fed "has been an independent central bank for a long time" and will remain so, deflecting questions about President Trump's influence Source: infobae. He also refused to tip the Fed's hand on the next meeting, stating: "When we go into that room and close the door, we'll have a good debate. I don't have much more to say" Source: larepublicaco. This rejection of forward guidance is a hallmark of his approach Source: euronewses.

Inflation Outlook

While noting that inflation risks have "moderated" and expectations are declining Source: elpaises, Warsh acknowledged the role of AI-driven investment in capital spending, which could be inflationary or disinflationary Source: euronewses. Markets now price in a possible rate hike as early as September .