Federal Reserve Chair Kevin Warsh, in a widely anticipated speech, said the central bank's primary focus should be price stability while inflation runs above 2%.
Inflation Trend: No "Meaningful Improvement"
"Despite better-than-expected PCE and CPI data this summer, they have not convinced me that the underlying trend in inflation has shown meaningful improvement," Warsh said. He pointed to market pricing as evidence of confidence in the Fed's commitment. "The market reflects a belief that we will achieve price stability. I can assure you, the market is right."
Response to Criticism of Streamlined Communication
Warsh's remarks come as critics take aim at his streamlined communication approach, which economists and market participants say has left the near-term economic and monetary policy outlook unclear. In what appeared to be a direct response, Warsh offered a more detailed explanation than usual of his economic assessment and the Fed's priorities under his leadership.
"Let us be equally clear about another aspect of our objective: price stability will not be achieved automatically, and inflation will not necessarily return on its own. Achieving price stability is the Fed's responsibility," he said. Warsh is not expected to take questions from central bank officials and economists in attendance.