Fed’s Warsh: Growth Strong, Inflation ‘Too High’
The warning came at a news conference following the Federal Open Market Committee’s decision to hold its benchmark interest rate at 3.75% to 4%. Warsh said the two-day meeting was devoted mainly to the fight against price pressures.
“Real activity is clearly pointing in the right direction; that’s good news, but inflation is too high,” Warsh said.
He pointed to renewed upward movement in energy costs and said the Fed’s task is to keep it from spreading. “Energy and related prices have moved higher again in recent weeks, and our job is to ensure that relative price changes in some sectors do not broaden out across the economy, and that inflation expectations remain as they are anchored,” he added.
STRONGER GROWTH, SOLID JOBS
The economy, Warsh said, is on firmer footing. Gross domestic product growth for the first half of 2026 was revised up to 2.4%, from a prior estimate of 1.8%. He said growth appears to have picked up further in the third quarter, with consumer spending running above 3% and business investment climbing at a double-digit rate.
Capital spending now accounts for a historically large share of GDP, he said, led by high-tech investment but supported by gains in other sectors.
Warsh characterized the labor market as “quite positive,” citing a lower unemployment rate than a year ago, quicker payroll growth and a four-week average of jobless claims hovering near multi-decade lows.
FINANCIAL CONDITIONS TIGHTEN
Since the Fed’s September policy move, Warsh said, financial and credit conditions have become tighter for some businesses and households as investors grow more selective about where they put capital.
“And while overall financial conditions are tighter, I’m unwilling and unable to call them tight,” he said. He added that the shift supports longer, more durable economic growth and price stability.
OVERHAUL OF FED MEETING CALENDAR
Warsh also unveiled a restructuring of the FOMC’s meeting calendar, beginning in the fall of 2027. The committee will keep its eight meetings a year, but one 2027 session will be devoted entirely to broad monetary policy strategy, with no rate vote and no policy statement. That leaves seven regular rate-setting meetings.
In 2028, the Fed expects to set aside two meetings for long-term strategy and six for setting monetary policy, Warsh said.
“It’s equally important we reserve time and space, as an intellectually diverse group, for strategic deliberations — for thinking anew about big questions, looking out over longer time horizons,” he added.
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