Fed Chair Warsh Says Inflation Surge Will Soon Be Over

Warsh said excellence and integrity define the Fed’s culture, but so does humility about what policymakers know and the courage to revisit prior positions. He said it’s his job to uphold those standards while pushing the institution to take a fresh look at current practices.

Consumer prices posted their sharpest monthly drop since 2020, and Warsh used the moment to draw a hard line. His message to lawmakers: inflation is not an accident, it’s a policy outcome.

“Our number one objective is to get monetary policy right, or as near to it as we possibly can,” he said, adding that inflation over longer time horizons is determined largely by the Fed’s own choices.

He went further than his prepared remarks suggested. “If we get policy right, and I can assure you we will, the inflation surge of the last five years will be a thing of the past.”

Warsh described household consumption as moderate and manufacturing output as steadily rising this year. Housing was the exception, continuing to underperform the broader expansion. He said the Fed is watching how the AI investment boom feeds through to inflation and the labor market.

Business investment is the most striking part of the current economy, Warsh said. Equipment spending rose roughly 8% over the year through the first quarter, driven by data center construction and AI-related demand. High-tech investment alone grew nearly 25% on a four-quarter basis, he told lawmakers.

Warsh made his clearest promise yet on prices. “If we get policy right, and we will, the inflation surge of the last five years will be a thing of the past,” he said, calling that goal the Fed’s single clearest objective going forward.

Warsh told lawmakers the Fed faces a defining moment. “Today we are at a hinge point in history,” he said, adding it falls to this generation of policymakers to keep the American economy performing at its best. He framed the semiannual report as a core accountability mechanism, not a discretionary courtesy.

Warsh began his House testimony by honoring Alan Greenspan, who died last month at 100. He noted Greenspan appeared before Congress more than two hundred times and recalled his “strong and steady hand” during a period of rapid economic change. Warsh called it his privilege to represent Fed colleagues at his first appearance before the panel.

Kevin Warsh, five weeks into his four-year term as Fed Chair, opened his first semiannual testimony before the House Financial Services Committee Tuesday. He returns for a second round before the Senate Banking Committee Wednesday.

The timing puts energy markets front and center. The US-Israel conflict with Iran continues to keep policymakers on edge for fresh price shocks. June’s CPI report showed inflation cooling as tensions in the region briefly eased, yet the reading still sits well above the Fed’s 2% target.