Federal Reserve Chair Kevin Warsh signaled a firmly inflation-focused and less predictable approach to monetary policy, arguing that the economy remains strong, labor markets are consistent with full employment and financial conditions are not broadly restrictive, while inflation—3.7 percent by the Fed’s preferred measure—remains well above the 2 percent target. His remarks suggest the Fed is unlikely to lower interest rates without clear evidence that underlying inflation is moving toward 2 percent at a sufficient pace. Warsh also proposed limiting routine forward guidance, preserving greater flexibility to respond to new data and placing less emphasis on projected rate paths. For businesses and investors, the combined signal is that borrowing costs may remain elevated and future Fed decisions may become more data-dependent and harder to anticipate, even as the central bank studies how AI-driven investment and productivity could reshape longer-term growth, employment and inflation. (Federal Reserve)
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