Warsh says Fed has 'no tolerance' for high inflation but provides no
hints on next move
[July 15, 2026] By
CHRISTOPHER RUGABER
WASHINGTON (AP) — Federal Reserve Chair Kevin Warsh said Tuesday that
the Fed will make high inflation “a thing of the past," yet he provided
no signal about the central bank's next steps.
Fed policymakers “have no tolerance for persistently elevated
inflation,” Warsh said in his first appearance before Congress since
becoming chair May 22, replacing former chair Jerome Powell. “And we
share a resolute commitment to restoring price stability.”
Still, Warsh heads a sharply divided rate-setting committee, with about
half of the 19 policymakers penciling in higher interest rates by the
end of the year in forecasts released last month. Another half have
signaled that they support keeping rates unchanged or even cutting them.
Warsh faces a stiff challenge in reconciling the divided committee while
navigating a rapidly-changing economic outlook.
Warsh spoke to the House Financial Services Committee soon after the
government reported that inflation fell 0.4% from May to June, driven
down mostly by cheaper gas prices. Core inflation — which excludes the
volatile energy and food categories — was unchanged last month, a
broader slowdown in price increases than economists expected.
Compared with a year ago, inflation dropped to 3.5% from 4.2% in May.
Core inflation rose just 2.6% in June from a year earlier, down from
2.9% in May, a positive sign that higher gas costs haven't yet lifted
broader prices. Still, the core figure is above the Fed's 2% target.
The cooling inflation figures reduce pressure on the Fed to combat
higher prices by hiking interest rates. Still, the renewed conflict in
the Middle East has already driven up oil prices and could reverse some
of the progress on inflation in coming months.
Warsh, asked about the price figures, said they represented just one
month of data and suggested he does not see inflation as defeated.
“There might be some that look at this morning's data and say, ‘mission
accomplished,'" he said. “That is not my view.”
Guidance on next steps
In keeping with his stated policy of providing less guidance about the
Fed's policies, Warsh did not signal whether rate increases would be
necessary to combat inflation. The next meeting of the Fed's
rate-setting committee is July 28-29.
Under questioning from members of the House committee, he explained a
bit more his thinking about pulling back on what Fed-watchers refer to
as “forward guidance.”
“If we were to give you my projection today about what we’ll do when we
meet in two weeks,” Warsh said, Fed officials are more likely to accept
information “consistent with our priors and rejecting information that’s
inconsistent.”
“When we have news for you about exactly the methods of solving this
problem, we’ll be very clear about what they are,” he added later.
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Federal Reserve Chairman Kevin Warsh appears before the House
Financial Services Committee to deliver the semi-annual monetary
policy report on the central bank, at the Capitol in Washington,
Tuesday, July 14, 2026. (AP Photo/J. Scott Applewhite)
 Warsh was pressed by Democrats on
the committee to explain how he would react if President Donald
Trump, who repeatedly attacked his predecessor, demanded that he cut
rates or take other steps that weren't justified by the economic
data.
“Are you ready for that?” Rep. Gregory Meeks, a Democrat from New
York, asked.
“My commitment to you is to follow the law and
follow the data, follow our very best judgment,” Warsh said.
Warsh also cited the Supreme Court's recent decision to allow Fed
governor Lisa Cook to remain on the central bank's board, thwarting
Trump's attempt to fire her for now, as a sign the high court sees
the Fed as independent.
“To the extent there were questions about it, the court has answered
those questions,” he said.
The renewal of the Iran war has caused oil prices to climb again
after they had fallen back to nearly their prewar level. Gas prices
had fallen about 20% from their peak but have also increased in the
past week and are still about 35% higher than they were when the
U.S. attacked Iran Feb. 28.
Some Fed officials have argued that underlying inflation, even
excluding the impact of gas prices, remains elevated and may require
higher interest rates to defeat.
Impact of technology investments
Another factor that could boost inflation for the rest of this year
is the massive investment in artificial intelligence infrastructure
by the so-called “hyperscalers,” such as Google parent Alphabet,
Microsoft, Amazon, and Meta Platforms. The spiking demand for memory
chips and processors has sent semiconductor prices soaring, leading
to price hikes for laptops, tablets, and video game consoles.
Warsh said Tuesday that AI investment is “the most striking feature
of the economy right now" and added that the Fed is “monitoring the
implications” for inflation and jobs.
Other Fed officials have stepped in to provide guidance as Warsh has
declined to do so. Fed Governor Christopher Waller on Monday said
that another “hot” inflation report Tuesday would mean the Fed would
have to consider raising rates “in the near term.”
But last week John Williams, president of the Federal Reserve Bank
of New York, said that if core inflation stays at a 0.2% monthly
pace for the rest of this year, the Fed could avoid hiking rates.
Williams' approach implies the Fed would keep rates steady for some
time while it monitors incoming data.
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