Fed's Warsh says inflation fight needs higher rates longer

Federal Reserve Chair Kevin Warsh delivered a hawkish message on inflation Friday, warning that recent improvements in price data are not yet sufficient to convince policymakers that inflation is on a sustainable path back to the central bank's 2 percent target. Speaking at the Federal Reserve Bank of Kansas City's annual economic symposium in Jackson Hole, Wyoming, Warsh emphasized that the Fed's predominant focus must remain on prices and that interest rates could need to stay higher for longer, or even be raised, if inflation does not cool more decisively.

Warsh, who took office in May, stated that while recent readings on the Personal Consumption Expenditures (PCE) and Consumer Price Index (CPI) were better than expected, they do not show that underlying inflation trends have meaningfully improved. "We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do," Warsh said. The Fed's preferred inflation gauge, the PCE index, is currently running at 3.7 percent, well above the 2 percent goal. Warsh noted the central bank has missed its target for 65 consecutive months.