Federal Reserve Chair Kevin Warsh on Friday left the door open to another interest rate increase, saying the central bank still has work to do to bring inflation down to its 2% target.
Speaking at the Fed's annual Jackson Hole economic symposium in Wyoming, Warsh said policymakers must see convincing evidence that price pressures are easing. "We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do," he said.
The remarks, his first as Fed chair at the closely watched gathering, were more explicit than usual about the potential for further tightening. Warsh reiterated his preference to avoid committing to a specific policy path, but his language signaled that a hike remains on the table.
Warsh acknowledged the central bank's role in the prolonged inflation episode. "There is one signal nobody can miss: The responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank," he said. "And that is where it belongs."
He also stressed the importance of keeping inflation expectations anchored, a key concern for policymakers worried that consumers and businesses might begin to expect higher prices.
The speech comes just over a week after President Trump publicly criticized the Fed for not cutting rates, calling current levels "artificially" high. While Trump praised Warsh for doing a "great job," he accused the broader Federal Open Market Committee of political bias. "The problem is he has a board, and it's a political board," Trump told reporters. "People put in by Obama, Biden and me, and there are quite a few members still left, as you understand, and so they vote to raise interest rates. I don't know if they're doing it because they think they're doing a good thing or because they like the politics of it."
Trump's friction with the Fed echoes his earlier clashes with former Chair Jerome Powell, who remains on the board. Warsh succeeded Powell, but the political dynamics persist.
The Fed's July meeting minutes, released last week, showed several officials "noted the possibility that inflation might be more persistently elevated." At that meeting, the FOMC voted 9-3 to hold rates at 3.5% to 3.75%, the fifth consecutive pause.
Warsh's Jackson Hole address appears to have shifted market expectations. According to CME's FedWatch tool, the probability of a rate increase jumped from 34% on Thursday to 57% on Friday after the speech.
The Fed's next policy meeting is scheduled for September, and investors will be watching for further signals on whether a hike is imminent.
