Fed Chair Kevin Warsh at Jackson Hole Economic Policy Symposium

Kevin Warsh, Federal Reserve Chairman, spoke at Jackson Hole, outlining his monetary policy principles and economic assessment. He criticized forward guidance as a crisis-era tool that has 'outstayed its welcome,' arguing it creates ambiguity and inhibits policy flexibility. Warsh emphasized the Fed's need for unfiltered market signals and warned of the 'hall of mirrors' problem where markets and the Fed rely on each other, harming those without financial assets. He affirmed the 2% PCE inflation target as firm, stressed the dual mandate, and noted money's importance. On the economy, he saw strength: business CapEx rising, S&P profits up over 20%, and stable labor markets with 4.1% unemployment. However, inflation remains concerning at 3.7% PCE, with 54% of PCE components rising above 3% over 24 months. He committed to ensuring inflation moves to target, taking responsibility for 65 months of elevated inflation.

Key takeaways

1. Warsh plans to limit forward guidance, calling it a crisis legacy that creates ambiguity and inhibits policy freedom.
2. Inflation remains too high: PCE at 3.7% year-over-year, with 54% of components rising above 3% over 24 months.
3. Business CapEx is rising rapidly, with intangibles up 9% year-over-year, over half driven by AI buildout.
4. Labor markets are stable with unemployment at 4.1%, but Warsh says the Fed's focus should be on prices.
5. Warsh takes responsibility for 65 months of sustained elevated inflation, vowing to ensure inflation moves to target.

Numbers and commitments

Chapters

1. 0:00Critique of forward guidance
2. 9:13Market signals and hall of mirrors
3. 13:49Principles for monetary policy
4. 18:05Economic assessment: growth and investment
5. 22:01Labor market stability
6. 24:03Inflation concerns and expectations
7. 25:58Commitment to price stability
8. 27:48Closing remarks