Fed Chair Says Won't Tolerate High Inflation

Illustration of the Federal Reserve System or The Fed on the United States dollar. Photo: Pexels.

JAKARTA - Chairman of the United States Central Bank or the Federal Reserve, Kevin Warsh, emphasized that the Fed would not let high inflation persist for long. Restoring price stability remains the central bank's main goal.

Anadolu Agency in a report quoted on Wednesday, July 15, said the statement was made by Warsh in a written testimony to the US House of Representatives Financial Services Committee on Tuesday.

"Our committee members do not tolerate high inflation that persists. We have a strong commitment to restore price stability," said Warsh.

Warsh, who took office in May, said monetary policy should be run appropriately after US households faced high price increases during most of the past five years.

"If we get the policy right, and we will, the surge in inflation of the last five years will be a thing of the past," he said.

He assessed that the US economy in general is still strong. The labor market remains stable, the number of layoffs is limited, and wage growth before adjusting for inflation is still strong.

Warsh also highlighted a surge in corporate investment related to artificial intelligence, including spending on data centers, equipment, and software.

However, the magnitude of the economic benefits from AI growth is still unclear. The Fed is now monitoring the possible impact on inflation and the labor market.

"New opportunities for the economy also present new challenges for policymakers," he said.

In June's meeting, the Fed kept its benchmark rate in a range of 3.5 percent to 3.75 percent for the fourth straight time.

The latest projections show nine Fed officials expect at least one 0.25 percentage point rate hike this year. Nine other officials expect rates to stay or even fall.

Data released on Tuesday showed U.S. monthly inflation fell 0.4 percent in June. Monthly inflation measures price changes compared to the previous month.

The decline was the first in six years. Annual inflation also eased to 3.5 percent after slowing energy price gains.

Warsh was then asked how he would react if President Donald Trump or other government officials tried to pressure him or other members of the Fed's Board of Governors regarding interest rate decisions.

"I am not used to responding to hypothetical questions. I will continue to carry out my duties," he said.

Warsh acknowledged that politics are very much felt outside the Federal Reserve. However, he emphasized that partisan interests should not enter the central bank's decision-making space.

"My goal in the central bank is to ensure that there is no politics. If there is still, we will get rid of it," he said.

According to Warsh, the Fed's strength comes not only from its authority to carry out monetary policy, but also from public confidence in the decisions taken.

"The credibility will be stronger if we are independent and seen as independent. That is a commitment that I can convey because that is how we can carry out our duties as well as possible," he said.