Kevin Warsh delivers first interest rate decision as Fed Chair

Good day. It's an honor, a true honor to be back at the Federal Reserve and to take up this duty at a time of such consequence. I've been especially heartened by the warm welcome of old friends and new colleagues both. And I've listened closely to my fellow FOMC members for a lot of new ideas, new thinking, and genuine interest in moving the Fed forward.

This week's FOMC meeting exemplified the very best of the Fed's traditions: rigorous debate, open-mindedness, commitment to mission, responsibility, and accountability for performance. In this business, they all add up to one thing: getting monetary policy right, or as near to it as we can do. That is our north star. My colleagues and I are here to serve our legislative remit, which you've heard us say before: price stability and maximum employment. And these objectives guided our business in the meeting just concluded.

As you saw a few moments ago, the committee decided to maintain the target range for the Fed funds rate at three and a half to three and three-quarters percent. In support of the Fed's dual mandate, the committee also reaffirmed its policy of maintaining ample reserves in the banking system.

Economic activity is expanding at a solid pace despite elevated uncertainty that owes in part to the conflict in the Middle East. Productivity growth and capital investment both strong. Job gains have kept pace with the workforce and the unemployment rate has changed little.

We recognize that inflation has been running well ahead of the Fed's long-stated inflation goal of 2%. That's been going on for more than 5 years. Persistently high prices are a burden for the American people. But the recent past need not be prologue.

I am pleased to report that members of the FOMC are unambiguous and unanimous. This committee will deliver price stability.

At any institution, a change in leadership is a natural and timely opportunity to reaffirm its mission, to review current practices, and to consider whether those practices best meet our objectives. My Fed colleagues and I will be working in close collaboration to ask what changes might improve the conduct of monetary policy.

On that score, you might have already noticed something: a difference in today's policy statement. It's a bit shorter, a bit simpler, and it dispenses with some older language. That statement just gives you the facts as best we can judge it. Absent also is so-called forward guidance, which we agreed was not well suited to the current policy conjuncture.

This afternoon, you also received the usual summary of economic projections. It's been the practice of this committee for participants to submit these projections, and I have encouraged my colleagues to continue to do so. I, however, have refrained from offering any projections of my own, consistent with my long-held views on the SCP, at least as currently structured.

In the median projections, real GDP rises at 2.2% this year, 2.3% next year, and total PCE inflation runs at 3.6% this year, 2.3% next year. The unemployment rate stands at about 4.3%. The median participant judges the appropriate federal funds rate to be at 3.8% at the end of this year and 3.6% at the end of next.

Let me turn now to a few words on a key initiative that we're announcing today. I'm appointing a task force in each of five areas that are central to the broad conduct of monetary policy. First, Fed communications. Second, the Fed's balance sheet. Third, our use and reliance on existing data sources. Fourth, productivity and jobs in an era of transformation. And last, the Fed's inflation frameworks.

These subjects are timely, consequential, and in my view, worthy of a fresh look. My colleagues and I discussed them with energy and purpose over the last couple of days.

For each of these independent task forces, I'm enlisting some of the very best minds both inside and outside the economics profession. They will be supported by subject matter specialists from our superb Fed staff, and they'll have a straightforward charge: start with first principles. Ask hard questions. Examine current practice. Consider alternatives. And ultimately propose next steps for policymaker consideration.

Since last summer, my colleagues discussed possible improvements in the form and function of Fed communications. This new task force will build on that effort and I expect propose some well-considered changes, including to the SCP I mentioned a few moments ago.

The second task force, the one on balance sheet policy, will review the benefits and risks of the current ample reserves regime and the composition of the Fed's balance sheet. They will assess alternative frameworks for the conduct and operation of monetary policy.

The third task force, the one on data, will evaluate new information sources and consider methodological changes to improve data gathering with the aim of giving policymakers more accurate, relevant, contemporaneous, and perhaps most important, actionable information on the state of our economy.

Fourth, the task force on productivity and jobs. It'll survey the pace, the reach, the economic impact of new general purpose technologies, including AI, and explore the implications for the Fed in pursuit of our employment and inflation mandates.

The last task force, the one on inflation frameworks, that'll examine the drivers of inflation, first principles, and weigh the full range of ideas for delivering price stability in a changing economy.

You'll hear quite a bit more about these task forces and this overall initiative in the coming weeks. Enough for now to make a simple statement: each task force will serve an objective shared by everyone in the system, shared by everyone around that table that I sat with over the last couple of days. A Federal Reserve that is clear-eyed about its mission, fit for purpose, and focused on the future. And with that, I appreciate your attention. I'm happy to take your questions.

So I think it'll depend on the task force. It also depends on the urgency in which we need clear answers. My expectation, I'm still in the business of recruiting and finalizing them. My expectation is the task forces will begin work in the next couple of weeks and we'll start to get some more information from them, some more framing of how they see things starting in the fall and hopefully most if not all of them concluding by year end.

Let me break that into two pieces. First on the inflation framework review, their remit is what are the drivers of inflation? What's the Fed's responsibility for inflation? In part, how do we measure inflation? But that'll overlap with my data group. On the 2% inflation objective, that is the Federal Reserve's long-held objective of 2%. You've heard me say before I tend to focus on the left of the decimal point. Well, the two is the left of the decimal point. For now, zero is to the right. I see no reason until we have reestablished our commitment and ability to deliver on the 2% inflation objective to revisit that. So, that will be outside the scope of what we're taking on.

Sure. So, quite a bit there. Let me try to break that into pieces. First, we have the capability and commitment to deliver on our price stability objective of 2%. That's exactly what we're going to do. That in the Fed's review of its strategy over the last any number of years in January, the Fed, including the strategy that we're still bound by, the Fed statement says that inflation is primarily determined by monetary policy. You bet it is. I've said for years inflation is a choice. You bet it is. And today I'm announcing that this committee unambiguously and unanimously have decided we are going to deliver on that. The rest of your questions sounded like an encouragement for me to give forward guidance. We've dropped forward guidance. Some along the committee I think dropped it, I suspect from our discussion the last couple of days because they said at this moment in time it doesn't feel as though providing forward guidance is right. Others have, I'd say, different views and think as a general proposition, forward guidance isn't the business we should be in, but that'll be taken up by the task force on communications and my policymaker colleagues. We're going to listen hard to what the experts say and make our own decision. But I can't give any forward guidance about what we're going to do next. The good news is we'll be meeting in six weeks.

Yeah, I've heard characterizations both inside and outside the Fed about that. I'll give you my own. It's uneven. If I look at the housing markets as one example, Fed policy isn't the single determinant of the state of the housing market, but broadly I would say Fed policy appears to be somewhat restrictive. I would have a hard time managing to say those words if I were to see what's happening in financial markets. So I'd say it's uneven. That's perhaps a function of different transmission mechanisms of monetary policy, whether monetary policy is coming from our interest rate tool or our balance sheet tool. But the good news, we have a task force on that too. And the balance sheet task force will be looking more at that subject.

I'm going to have to give you the same answer I gave to Miss Smith. We've got a task force for that. I'll give you a little bit more. I reviewed the dot plots and when I saw the submissions I noted that all the submissions were coming in with pencils. You know those kind with the big erasers. That's to say that I think my colleagues around the table when they submitted their dots understand the world is changing quite quickly and they didn't feel bound by them six weeks from now or six days from now and if in the event that their circumstances change. I'll note a couple other things. What I heard around the table was as they submitted their modal forecasts, their modal forecasts to be clear weren't this was more likely than not. This was more likely than their other scenarios. So I didn't hear tons of conviction. What I heard was the kind of humility that I think we should have. I did not submit a dot for me. It's not helpful in the conduct of policy. I suspect by year end as I mentioned in my opening statements there'll be a review about communications broadly: press conferences, dots, meetings, and the like, transcripts, minutes. This will be part of that. I don't want to prejudge the outcomes there but I'm pretty open-minded about what they could be and I was just incredibly impressed over the last couple of days, my colleagues over the last two days and frankly over the first three weeks I've been here, they've been very open about changes. Change isn't easy. Change is filled with risk. But our number one goal is to get monetary policy right. The way to get monetary policy right is to deliver on the remit that Congress gave us to deliver on price stability. And there was no disagreement on any of those points.

Well, this one's probably got another 15 or 20 minutes in it, so I don't want to prejudge the outcome. Press conferences can be a very useful way to communicate with households, businesses, and more broadly through using the likes of you. I had a great old mentor named George Shultz and his mantra was press conferences are useful, but when you have one, you want to make sure you have something important to say. Today, I think we had something important to say about our commitment to deliver on price stability, our commitment to rethink practices with an eye of moving the Fed forward. And to give you and the American people a sense that these aren't idle thoughts, these are concrete thoughts. That we're going to seek out the best minds, both the best thinking inside of the Federal Reserve, the best people I know in business and economics and the academy and technology and the rest to share their views. That's what we're going to be doing here. The pursuit of truth. I think we're going to come up with some new and interesting things. We made some changes today. I expect more changes to come and some of those might well be worthy of a press conference.

So, I can't do much better than the committee just did. So, let me restate it. Inflation remains elevated relative to the committee's 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. That paragraph goes on to say, but to be clear, the Fed will deliver price stability. My own judgment is the committee spent quite a bit of time, not just in two days, but over iterations of a couple of weeks. That's what we're prepared to say about inflation, but the commitment to deliver is strong, unanimous, and unambiguous. And that's, I think, an important message we've missed for five years, and we're going to fix that.

So, you're answering my question, so let me say I don't want to prejudge the outcome. I also don't want to say too much about what they're going to do because I still have a phone call or two to make before I've nailed down the people that are doing that. I'm interested in what the outside experts' view is on the subject. I'll say this generally: most of the data that central bankers and other government officials in the United States consume come with old-fashioned survey methods, a national accounts of what the US economy looks like that looks very little like the US economy in 2026, survey methods that don't have response rates that we need asking questions that might have been quite applicable a generation ago that are less applicable now. So even inside of official statistics, I would be open-minded if the task force and our own best thinking had recommendations how those official statistics can be brought up to a standard of our time using new analytic methods. I'd also say this. Almost every private company CEO that's running his or her business are doing so with real time information that isn't subject to much revision. That is telling them what just happened at that very moment. As you know, there are normal long and variable lags in the conduct of monetary policy. What we're really interested in is what's happening right now. What we're less interested in is echoes of history. And you're hearing from my answer that some of the data that we receive that we're waiting on the first Friday after the month, the payroll index or something else that might be an echo of history that's quite useful on its third revision. We need to take those error bounds down because we have to make hard decisions in real time. I'm really open-minded that there is a lot of new data sources that we can learn from the private sector, from reforms in the official sector, and new analytic techniques that are far more refined than asking a simple question about whether something was core or non-core.

So I think financial markets perform best when they react to incoming data. I think financial markets work less efficiently when they ask a question, how will the Federal Reserve react to that incoming information? The more that markets are paying attention to what's happening in the real economy, deciding what's good data and what's less good data, the more financial markets can price what they believe is the most likely and what are the tail risks. Financial market prices are probably the most important source of information to guide central bankers. But when all the financial markets are doing is reflecting back what we've said, then we're taking the most important source of information and we're being blind to it. I'd like us to create a system where those blinders come off, where markets are following data that they efficiently think is reliable and they'll be watching data. We'll be watching data. They'll come with better information through market prices to us. We can make more informed decisions with ultimately the goal that I said at the outset: deliver on the price stability objective that Congress told us to do and that we've got to get in the business of doing.

There was one proposal on the table. There was no discussion of any other proposals. The discussion on that proposal I would say was quite limited. The group was unanimous and unambiguous on it. It has been the practice of this central bank and others to have a range of alternatives. Today we had one. I thought it furthered the discussion, deepened it, and made it clear what we needed to do and how we needed to deliver. I wouldn't prejudge what happens in the future, but there was only one big subject for us. We took it on. We had a good family fight on it for a couple of days and we ended up, I think, in a better place.

Yeah, I'm glad they're in the practice of giving you two questions because my answer to your first question was to be very curt. I've got nothing more to say than the statement itself. And to the point of the question I got before, market reactions to what we say unfiltered I think is more helpful than having delivered a statement and then improvising further upon it. Best practices of task forces. This is a subject I've thought some about. I've been on a task force or two in my life. Best practice: find the best minds. Ensure that the task forces have a range of people both by backgrounds and predispositions so they too can have a bit of a family fight. Make sure when you establish a task force that the group that's going to be the recipient of the information feels as they've got some equities in it, too. That's why we're looking for, haven't done the final roll call, some of the most significant talent we have in the building and across the reserve banks on each of these and in some sense seconding them to this group for a period of some number of months so that the leaders of the task force know what the most analytical central bank in the world thinks about that, they can reflect on it. And a final best practice: we're not outsourcing decisions to anybody. Administrations past and present, reserve banks have chosen a group of 19 people around the table. These will be our decisions. We can agree to some of the recommendations, disagree with others, have a good family fight about it, but what comes from them will, I hope and believe, make the discussion we have internally better, stronger, more of a dialectic so that we can finally deliver on that price stability objective.