Kevin Warsh told the House Financial Services Committee on Tuesday that he would tackle inflation in his first congressional testimony as Federal Reserve chairman. He said rising prices have placed an undue burden on American households and businesses, setting up the question of how quickly the Federal Reserve will move on rates after a 3.5% June reading.
Warsh said, "The members of our [FOMC] have no tolerance for persistently elevated inflation. And we share a resolute commitment to restoring price stability," during the hearing on the Federal Reserve's Semiannual Monetary Policy Report. The June figure remained well above the Federal Reserve's 2% target, leaving the central bank still far from the level it is trying to reach.
House Financial Services Committee
The hearing came after government data released Tuesday showed inflation rose 3.5% annually in June. A global energy shortage sparked by the war in Iran caused prices to surge, and the June reading was described as cooler than expected, which could signal that Fed officials will leave rates unchanged at their next meeting.
Mortgage rates and Kevin Warsh were moving in the same direction of caution as the testimony unfolded. Nearly half of policymakers had projected support for raising interest rates later this year at last month's Federal Open Market Committee meeting, while the CME Group's FedWatch tool showed an 86% probability on Tuesday that the central bank would hold rates steady.
Federal Reserve and CME Group
That split leaves Warsh with an immediate test: keep the focus on restoring price stability while lawmakers and markets parse whether the next move is a pause or a later increase. For households and businesses facing higher prices, the practical question now is whether the Federal Reserve turns the June reading into a longer wait before relief from borrowing costs.
