Kevin Warsh says Fed has work to do on inflation

US Federal Reserve Chair Kevin Warsh said Friday that high inflation remained concerning and that the central bank’s main focus should be prices, while stopping short of saying he would support an interest rate increase.

Opening the Jackson Hole central banking meeting in Wyoming, Warsh said he would be “hard pressed” to describe current financial conditions as restrictive. He said the Fed must be confident that inflation is moving toward its objective “clearly and at sufficient speed.”

“Otherwise, we have work to do,” he said.

The Fed’s preferred inflation gauge came in at 3.7 percent this week, above the central bank’s long-term 2 percent target. The Fed has held rates steady through 2026, but a growing group of policymakers has called for increases. At its July meeting, a quarter of voting members on the rate-setting committee dissented and called for an immediate hike.

Warsh said he was “committed to a discipline, not to a decision,” leaving open the question of how he would vote on rates. He said recent data did not suggest that underlying inflation trends had “meaningfully improved.”

Warsh also said the US economy appeared to have strengthened, citing business capital expenditure, corporate earnings and consumer spending. He said unemployment of 4.1 percent was broadly consistent with full employment.

On artificial intelligence, Warsh called the current moment “a hinge point in history.” The Fed has been studying AI’s effects on productivity and jobs.

On bond markets, Warsh said the Fed needed “clear market signals, as unfiltered as possible.” The remarks followed US Treasury Secretary Scott Bessent’s statement last week that his department would double bond buybacks, indicating that he viewed bond yields as too high.

Warsh also defended offering less guidance about future policy decisions than his predecessors. “Transparency in communications about future policy decisions is not a virtue unto itself,” he said.

Gregory Daco, chief economist at EY-Parthenon, said Warsh was speaking in a context in which Fed credibility was being questioned under his leadership. After the speech, long-term US Treasury yields dipped briefly, while the dollar strengthened.

Diane Swonk of KPMG said a quieter Fed could reduce overreliance on policy signals, but warned that without a clear enough framework, “markets will fill the silence.”