FX.co ★ Fed Chair Warsh Flags Inflation Risks

In his speech at the Jackson Hole Economic Symposium, Federal Reserve Chair Warsh emphasized that inflation in the US remains elevated. He reaffirmed the Personal Consumption Expenditures (PCE) price index as the Fed’s primary inflation gauge, addressing market uncertainty that had arisen after he previously appeared to move away from a strict inflation target in favor of a more flexible framework proposed by one of his task forces.

At its July 2026 meeting, the Federal Reserve kept the federal funds rate unchanged at 3.50%–3.75% for a fifth consecutive time, in line with consensus expectations, even though markets had priced in roughly a one-in-three chance of a rate increase. Three FOMC members dissented in favor of a hike. Following the decision, Chair Warsh downplayed the federal funds rate as the Fed’s main tool for addressing inflation risks, instead highlighting the importance of reducing the size of the Fed’s balance sheet, and he maintained his criticism of forward guidance.