While testifying on the Semiannual Monetary Policy Report before the US House Financial Services Committee, Federal Reserve (Fed) Chairman Kevin Warsh reiterated that the Fed is making a commitment on price stability and the goal of 2% inflation.
Key takeaways “Inflation is a choice.” “Fed won’t pass buck.” “Will deliver price stability.” “We have tools to deliver that.” “Will revisit inflation frameworks to understand what causes inflation and what we can do.” “Task forces are in discovery mode, starting with blank sheet of paper.” “Task forces will share views first with 19 policymakers.” “Will be a public discussion, happy to share results and thinking periodically.” “Balance sheet is part of monetary policy.” “Balance sheet is not merely about plumbing.” “Any change in balance sheet policy would be previewed, explained, have advance notice broadly.” “Fed must stay clear of fiscal policy.” “Committed to conducting independent monetary policy.” “Have demonstrated commitment to independence and reform, will deliver on both.” “Don’t expect any change in communications to be about hiding the ball.” “Mortgages are higher than they have been in part because inflation is above Fed’s target.” “Containing inflation would be consistent with lower long-term treasury yields, more affordable mortgages.” “We are not afraid of productivity-led growth.” “Two parts of Fed mandate are not in conflict.” “Have some work to do on inflation front.” “We do not want to be in the bailout business.” “Want to be in a position we aren’t bailing out anyone including crypto.” In his prepared remarks, Warsh noted that the Fed has no tolerance for persistently elevated inflation
Highlights from Warsh’s prepared testimony “If we get policy right – and we will- the inflation surge of the last five years will be a thing of the past.” “Underlying inflation over longer time horizons is determined largely by monetary policy.” “Household consumption growth is moderate; manufacturing output has moved…