Federal Reserve Chairman Kevin Warsh appeared before Congress Tuesday with a direct message: the Fed will bring inflation down.
Warsh delivered prepared remarks to the House Financial Services Committee on Tuesday, with a second appearance before the Senate Banking Committee scheduled for Wednesday. The hearings are part of the Fed chair's twice-yearly mandatory report to Congress on monetary policy.
"The Fed's number one objective is to get monetary policy right — or as near to it as we possibly can. That is our clear and constant aim, the star we steer by," Warsh said. "And if we get policy right — and we will — the inflation surge of the last five years will be a thing of the past."
The remarks come just two months into Warsh's term. He takes over a Fed that has seen inflation exceed its 2% target since 2021. During his confirmation hearing earlier this year, Warsh called inflation "a choice," and he returned to that theme Tuesday.
He acknowledged that persistently high inflation has "been an undue burden on American households and businesses," a phrase similar to language used by his predecessor, Jerome Powell. The latest surge has been driven in significant part by soaring energy prices.
"While monthly price fluctuations are inevitable — especially in an unsettled world — underlying inflation over longer time horizons is determined largely by monetary policy," Warsh said. "The members of our Committee have no tolerance for persistently elevated inflation. And we share a resolute commitment to restoring price stability."
Warsh also addressed the broader economy, saying it "is expanding at a solid pace, showing resilience in the face of recent developments." He pointed to business investment as what he called "the most striking feature" of the current economic climate, with a particular focus on artificial intelligence infrastructure.
"The rapid pace — which appears to be accelerating — reflects, in large part, the construction of data centers and the immense demand for the AI-related equipment and software that fill them," he said.
Warsh previously has said he expects an AI productivity boom will prove disinflationary. That view has been challenged by some economists and by fellow Fed policymakers. On Tuesday he offered a broader prediction about the technology's trajectory.
"We don't know the extent to which the economy will benefit from the AI buildout," he said. "Yet it seems inevitable that what is now called 'AI investment' will soon be called just 'investment.'"
Warsh also provided more detail on five task forces he has created to conduct a comprehensive review of the Fed's operations, covering areas including communications.
His congressional testimony comes on the same day the Bureau of Labor Statistics reported that the CPI fell 0.4% in June, pushing the annual inflation rate down to 3.5%. The better-than-expected reading arrived just hours before Warsh's prepared remarks were released.
