Warsh says Fed has 'no tolerance' for high inflation, offers no rate path

Core inflation flat in June as Warsh faces divided committee

Federal Reserve Chair Kevin Warsh told lawmakers Tuesday that the central bank will make high inflation “a thing of the past,” but he provided no signal about whether interest rates will rise, fall, or remain unchanged in the months ahead.

In his first appearance before Congress since becoming chair on May 22, replacing Jerome Powell, Warsh told the House Financial Services Committee that Fed policymakers “have no tolerance for persistently elevated inflation.”

“And we share a resolute commitment to restoring price stability,” Warsh said, according to prepared testimony released ahead of the hearing.

The hearing came shortly after the Labor Department reported that consumer prices fell 0.4% from May to June, driven down mostly by lower gas prices. Core inflation, which strips out volatile food and energy categories, was unchanged last month — a broader slowdown in price increases than many economists had anticipated.

Warsh heads a deeply divided rate-setting committee. According to projections released after the Fed’s June meeting, about half of the 19 policymakers penciled in higher interest rates by the end of 2026. Another half signaled they support keeping rates unchanged or even cutting them. Warsh faces the challenge of reconciling the split committee while navigating a rapidly shifting economic outlook shaped by the ongoing war in Iran, energy price swings, and the impact of major AI infrastructure spending.

The Fed chair offered no guidance during the hearing on which direction he favors, sticking to broad pledges of price stability. His refusal to offer forward guidance is consistent with the approach he took at his first policy meeting in June, when he declined to commit to a rate path even as the majority of Fed officials projected at least one rate hike by year’s end.

Warsh’s testimony also touched on the central bank’s independence, a topic that has drawn attention since President Donald Trump nominated him. Warsh did not directly address whether he has communicated with Trump since taking office, a question that arose the following day during his appearance before the Senate Banking Committee.

The Fed chair’s remarks underscored that inflation remains above the central bank’s 2% target, though the June data showed signs of cooling. The personal consumption expenditures index — the Fed’s preferred inflation gauge — was reported last week at 4.1% year-over-year for May, well above target.