Federal Reserve Chairman Kevin Warsh this week declared his determination to bring inflation down without hinting at how, even as colleagues publicly laid out their own views on the economic outlook and interest rates.
The contrast highlights the difficulty of gauging how the Fed may react as renewed conflict in the Middle East again drives up the cost of fuel and AI investment continues to push up prices.
It also shows Warsh's own challenges as he tries to reshape the central bank's communications with an eye to quieting what he sees as an overcommunicative group of colleagues.
"We want to get policy right, and I think being somewhat more circumspect in our communications, at least for me, is a better way of calling balls and strikes," Warsh told members of the House Financial Services Committee on Tuesday.
More than a dozen times that day and the next, when he testified before the Senate Banking Committee, Warsh reiterated his view that inflation was too high, telling U.S. Senator John Kennedy at one point, "It's not going to be permanent under my watch."
"What are you going to do about it?" asked Kennedy, a Louisiana Republican.
"We're going to look at our tools and the changing economy, both balance sheet and interest rate, and see whether we need to adjust policy to take it head on," Warsh said, giving away nothing on what he would need to see to precipitate action.
"What are your options?" Kennedy pressed as he ticked off the possibilities — leave rates alone, raise them, or lower them — each of which Warsh agreed was an option, before suggesting none might be.
"You use five task forces to get to the big and hard questions instead of trying to paper it over with policies that have not been proven a success," Warsh said, referring to the outside-expert-led panels he has convened to recommend changes to how the Fed conducts monetary policy, including its communications, by December.
Fed policymakers next meet in less than two weeks and will convene three more times before the end of the year.
Warsh said AI-driven price pressures, increasingly a worry cited by his colleagues, would likely increase "measured prices" over the next 12 months, but "whether that's inflationary or not, that's up to the Federal Reserve, and we're going to have something to say about that."
Warsh's "answers on inflation remain puzzling, as does the fact that it is not clear what, if anything, he would be prepared to do to tackle inflation, other than 'having something to say about it,'" said Omair Sharif, the founder and president of forecasting firm Inflation Insights.
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