Following the Federal Reserve’s decision to keep interest rates unchanged, Chairman Kevin Warsh is speaking live on air and answering questions from the press.
Below you will find the most important details from Warsh’s statements:
- The discussion took place in a friendly atmosphere.
- The economy has shown impressive resilience.
- The committee refrains from making predictions.
- The committee is committed to ensuring price stability.
- There is no flexible inflation target.
- Our sole target is an inflation rate of 2%.
- High inflation over the past five years has created a remarkable and difficult-to-resolve situation; the Fed’s implicit target appears to be above 2%.
- The inflation problem cannot be solved in nine weeks.
- The reduction in forward guidance may have already influenced market trends.
- We will not hesitate to take action when necessary and appropriate.
- Market participants learned how to cooperate rather than act as arbitrators.
- Investments in artificial intelligence form the basis of future growth.
- The Fed engaged in a heated debate around four issues. First, high inflation over the past five years; second, an assessment of recent economic shocks; third, the price increases caused by these shocks; and fourth, a discussion of monetary policy tools and strategies.
- We are monitoring the rise in bond yields and trying to stay away from it.
- Our decision was supported by a large majority.
- The dissenting votes did not accurately reflect the essence of the debate.
- The core CPI data for June is unlikely to have much impact on policy decisions.
- We will be closely monitoring inflation data in the coming period.
- We have received some encouraging data regarding inflation, and we will be monitoring this data closely over the next few days.
- We will need to make important decisions in the coming period.
- Interest rates are higher today than they were 42 days ago.
- I think there’s a misconception that setting our inflation target a little higher means we’re being more flexible. We will achieve our 2% inflation target.
- If inflation remains at high levels, interest rates could be part of the solution.
- We place great importance on understanding the underlying dynamics of inflation in the face of shocks, and we assess the extent to which these shocks exacerbate inflation.
- If you characterize this (today’s decision) as keeping interest rates unchanged, the financial markets will perceive it in the opposite way. I wouldn’t characterize what we did today as keeping interest rates unchanged.
- It’s reassuring that the market is reacting to real-time developments, not to us or the dot plot.
- Personal consumption expenditure (PCE) data is our reference point, and we will continue to rely on it.
- Looking at market prices from a macroeconomic perspective, they don’t signal that “everything is normal”; on the contrary, they indicate a tightening of financial conditions.
The Federal Open Market Committee (FOMC) voted 9-3 to keep the federal funds rate at 3.50-3.75 percent. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan called for a 25 basis point increase to combat inflation.
The Federal Reserve’s post-meeting statement indicated that three members favored raising the policy interest rate target range by a quarter point. These dissenting votes signaled that support for raising interest rates was beginning to strengthen within the committee.
All three members argued that tighter monetary policy was necessary to counter inflation, which had been above the Fed’s 2% target for more than five years. Hammack and Logan, in particular, stated that households were under pressure due to persistently high prices, while Kashkari said stronger steps were needed to ensure price stability.
*This is not investment advice.
