It was his comments on inflation that arguably went the furthest to meet what some had seen as a gap in Warsh's remarks at his first two press conferences.
"Progress over the past two years has been modest," Warsh said of inflation readings that by the Fed's preferred Personal Consumption Expenditures Price Index remained at 3.7% on an annual basis as of July.
Recent data "do not tell me that underlying trends have meaningfully improved," he said, with about half of the items in the PCE basket of goods and services increasing at more than a 3% annual rate, below the ratio seen during the COVID-19 inflation surge but above the pre-pandemic norm.
Warsh's speech "delivered a far clearer — and hawkish — message than his last press conference appearance," Capital Economics analysts wrote. "That leaves the door open to a hike earlier than our current forecast of December, if the forthcoming price data are firm."
At the same time, Warsh said that he and a large majority of Fed policymakers had felt at the July 28-29 meeting that they could wait for more data to decide if there was a need to change course. With just one more inflation report expected before the September 15-16 meeting, it is unclear if that wait will be over very soon.
Warsh did not suggest a timeline for rate hikes, and explicitly said his remarks should not be taken as "forward guidance" or even as the more explicit "reaction function" investors and Fed analysts have suggested he provide — neither of which he feels would be appropriate or possible to accurately provide.
But they do amount to his most detailed comments yet on where the Fed stands in its efforts to return inflation to its 2% target after more than five years above it, and on how, exactly, he is making sense of the data that shows a "stable" labor market, resilient economic growth, fast-rising business investment, and financial conditions in which he is "hard-pressed" to see any signs of restrictiveness.
"Inflation is running above our 2% target," Warsh said, noting that the Fed's inflation target, as measured by the 12-month change in the PCE, is "firm" and "fixed."
The Fed chief noted, in another elaboration, that he currently sees inflation expectations as anchored, though they must be "closely minded."
"It's the Fed's job to make sure that inflation expectations do not get unanchored," Warsh said.
He also said that not only does the economy appear resilient, but that given current market interest rates and a Fed short-term policy rate that has remained unchanged in the 3.50%-3.75% range since December, "credit and loan markets are showing few signs of policy restraint," comments that could lay the groundwork for arguments in favor of a rate hike if inflation persists.
There was sentiment at the meeting last month to tighten policy, with three policymakers dissenting from the decision to leave the policy rate unchanged.
Key unemployment, job growth and consumer inflation data for August will be released early next month.
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