Warsh: Fed Unwilling to Compromise on 2% Inflation Target
Federal Reserve official Kevin Warsh stated that the decision to maintain interest rates followed active and thorough discussions. He noted that the US economy continues to demonstrate strong resilience, with growth and the labor market remaining solid.
Warsh emphasized that the Fed has only one inflation target: 2%. He dismissed the notion that the central bank is becoming more tolerant of higher inflation levels.
The Fed also opted to scale back guidance regarding the future direction of policy. Warsh believes the central bank needs to avoid making overly long-range projections and instead focus on monitoring inflation trends and shifting economic conditions.
According to Warsh, the inflation issue cannot be resolved in just nine weeks. However, recent inflation data show encouraging signs and will continue to be monitored ahead of the next meeting in seven to eight weeks.
Warsh added that the rise in nominal and real yields indicates that financial conditions remain relatively tight. He also affirmed that the Fed would not hesitate to act if inflationary pressures broaden again due to energy prices or other economic shocks.
Consequently, Warsh’s remarks leaned hawkish, as he reaffirmed the 2% inflation target and left the door open for further action. This stance has the potential to support the dollar and bond yields while capping gains for gold and risk assets should inflation data strengthen again. (arl)
Source: Newsmaker.id
