Warsh Holds Rates Steady in Fed Debut, Signals Tougher Inflation Fight
By Jacqueline Policastro | Quincy News Correspondent
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Washington (Quincy News) — The Federal Reserve left interest rates unchanged Wednesday in Kevin Warsh’s first policy decision as chair. The move offers the clearest signal yet of how the central bank’s new leader plans to navigate an economy still grappling with stubborn inflation and resilient growth.
The Federal Open Market Committee (FOMC) voted to keep its benchmark federal funds rate in a range of 3.5% to 3.75%, a decision widely expected by investors. But attention quickly shifted to Warsh’s first press conference and whether he would chart a different course from predecessor Jerome Powell.
“This committee will deliver price stability,” Warsh said, emphasizing the Fed’s continued focus on bringing inflation back to its long-standing 2% target.
Warsh struck a notably tougher tone on inflation than markets have grown accustomed to in recent years, openly acknowledging the Fed’s struggles.
“We’ve missed for five years, and we’re going to fix that,” he said.
He doubled down on a view he has expressed for years, saying, “Inflation is primarily determined by monetary policy. You bet it is. I’ve said for years inflation’s a choice.”
The remarks underscored a more hawkish posture, even as the Fed held rates steady.
Warsh’s debut comes as one of the Fed’s biggest external inflation risks may be easing. President Donald Trump this week announced a framework agreement with Iran aimed at reopening the Strait of Hormuz after months of disruptions that pushed oil prices sharply higher and increased inflation concerns.
That may provide Warsh an important near-term tailwind. Lower energy prices could ease headline inflation just as policymakers weigh whether rate cuts are possible later this year.
Still, Warsh made clear geopolitical instability remains on the Fed’s radar.
“I’m quite interested in what’s happening in the Middle East. That does have some effect on our day job,” he said.
Warsh also immediately moved to reshape how the Fed communicates policy, dropping forward guidance from the central bank’s post-meeting statement, a significant break from the approach under Powell.
Warsh also declined to submit an individual forecast to the Fed’s closely watched “dot plot,” which removed its prior outlook for a rate cut this year and signaled that a hike remains possible. He has previously criticized the forecasts as an ineffective communication tool.
“Absent also is so-called forward guidance,” Warsh said, calling it ill-suited to the current environment.
Instead, he stressed a more data-dependent approach. “Financial markets perform best when they react to incoming data,” he said.
The Fed’s updated projections show economic growth holding near 2.2% this year, inflation ending the year at 3.6%, and unemployment at 4.3%, a snapshot of an economy still running hotter than the central bank would like.
Warsh also announced five new internal task forces reviewing Fed communications, balance sheet policy, data collection, productivity and jobs, and the central bank’s inflation framework, an early sign he intends to leave a significant mark on the institution.
“What we’ve given markets is a new chapter for the central bank,” Warsh said.
Stocks tumbled and Treasury yields surged Wednesday after several Fed officials signaled a possible rate hike this year. The Dow fell 507 points, or 0.98%, while the S&P 500 dropped 1.21% and the Nasdaq lost 1.35%.
The Fed’s next meeting, in six weeks, will offer investors their next read on whether Warsh’s tougher rhetoric translates into action.
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