Kevin Warsh Vows Fed Will Remain Firm on Inflation in First Congressional Testimony

Federal Reserve Chair Kevin Warsh, in his first congressional testimony since taking office, reiterated the central bank's commitment to controlling inflation, which stands at 3.5% as of June, down from 4.2% in May. He warned against declaring 'mission accomplished' after a single positive report and emphasized that the Fed would not tolerate persistently high prices Source: mileniomx, infobae.

The Data Behind His Caution

The decline in inflation was largely driven by falling gasoline prices amid a temporary truce in the Middle East, but Warsh noted that rising US-Iran tensions could reverse this trend Source: mileniomx. Markets now anticipate a quarter-point rate hike in December, later than previously expected Source: mileniomx. Warsh stressed that the Fed's independence is 'sacrosanct' and that policy decisions would be data-driven, regardless of political pressure, including from President Donald Trump who has called for lower rates Source: mileniomx, infobae.

Reforms and Working Groups

Warsh announced five working groups to review Fed communications, productivity and AI's impact, inflation drivers, the $7 trillion balance sheet, and data collection Source: mileniomx, infobae. Prominent members include former Bank of England Governor Mervyn King and crypto investor Marc Andreessen, with final recommendations expected by late 2026 Source: mileniomx. He acknowledged uncertainty about AI's effect on the economy but called its investment 'inevitable' Source: infobae.