Federal Reserve Chair Kevin Warsh declared Tuesday that the Fed would make high inflation “a thing of the past,” even as he admitted it has been “a tax on the American people and businesses.” This unelected official offered no clear path for interest rates, leaving lawmakers and the public in the dark regarding the central bank’s next moves.
Warsh told the House Financial Services Committee that the Fed has “no tolerance for persistently elevated inflation” and shares “a resolute commitment to restoring price stability.” He asserted, “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.” He promised that if policy is “right,” the inflation surge of the last five years will be “a thing of the past.”
The Elite's Promise of "Regime Change"
The Fed chair called for “a regime change in policy” to eliminate this “tax” on the American people. He revealed the central bank created five task forces to examine communications, technology, the balance sheet, economic data, and its approach to inflation. Warsh claimed, “In six weeks, we have caused, I think, a sea change in new thinking-the beginning of a set of reforms that are going to be put in place across at least five dimensions in monetary policy.” He added, “We made a lot of progress in six weeks, but I think it’s important to use this opportunity wisely.”
Warsh described the economy as “expanding at a solid pace, showing resilience in the face of recent developments,” highlighting business investment as its “most striking feature.” This rapid investment, which “appears to be accelerating,” reflects “the construction of data centers and the immense demand for the AI-related equipment and software that fill them.” He speculated that “AI investment” will soon be called simply “investment,” signaling a focus on elite tech interests rather than the broader national economy.
The Cost to the American People
The government reported the consumer price index fell 0.4% in June, the biggest monthly decline in six years, since April 2020. This brought annual inflation down to 3.5% from 4.2% in May. Core inflation, which excludes food and energy, was flat on the month and rose 2.6% from a year earlier, down from 2.9% in May. The energy index plummeted 5.7% in June, its largest monthly drop since April 2020, yet it remained up 15.7% on the year, largely due to a 26.7% gain in gasoline. Gasoline and fuel oil both fell over 9% in June. Services excluding energy were flat, with shelter up 0.1% and transportation services down 0.3%. Food prices rose 0.2%, while new vehicles were flat, used cars and trucks fell 0.2%, and apparel prices dropped 0.6%.
This inflation report was weaker than economists anticipated, prompting traders to lower the odds of a September rate hike, though they still expect one. Heather Long, chief economist at Navy Federal Credit Union, noted, “June finally brought some relief on inflation.” She warned, however, that this relief could be “short-lived as the war in Iran re-starts.” Inflation Insights President Omair Sharif stated, “This is welcome news for the Fed, but it is hardly mission accomplished.”
Unelected Power and Global Instability
Warsh himself dismissed the idea that inflation had been defeated, stating, “There might be some that look at this morning’s data and say, ‘mission accomplished.’ That is not my view.” He affirmed his commitment to Rep. Gregory Meeks, a Democrat from New York, to “follow the law and follow the data, follow our very best judgment.”
The Fed chair cited the Supreme Court’s recent decision allowing Fed governor Lisa Cook to remain on the central bank’s board as evidence the court views the Fed as independent. “To the extent there were questions about it, the court has answered those questions,” Warsh declared, reinforcing the institution's detachment from direct democratic accountability and national sovereignty.
Warsh acknowledged that renewed conflict in the Middle East could reverse progress on inflation. The AP reported that the Fed chair leads a sharply divided rate-setting committee, with roughly half of the 19 policymakers forecasting higher interest rates by year-end and the other half supporting unchanged or even lower rates. Fed Governor Christopher Waller stated Monday that another hot inflation report would necessitate considering near-term rate hikes. John Williams, president of the Federal Reserve Bank of New York, suggested last week that if core inflation maintains a 0.2% monthly pace, the Fed might avoid rate increases. Warsh’s first congressional appearance as chair before the House Financial Services Committee occurred Tuesday, with a further appearance before the Senate Banking Committee scheduled for Wednesday.