Federal Reserve's Walsh Emphasizes Need for Clear, Rapid Inflation Reduction to 2%

ME News reports that on August 28 (UTC+8), Federal Reserve Chair Kevin Warsh, in his first Jackson Hole speech, stated that we must be confident that underlying inflation is moving toward our target; otherwise, we still have work to do. It is difficult to describe current financial conditions as restrictive. Inflation data have not shown a significant improvement in trends; the Fed’s primary focus at this time should be on prices. The role of forward guidance should be limited. The likelihood of significantly higher economic growth is rising. Market participants should focus on real information within the economy and avoid formulating forward-looking policies based on outdated or inaccurate data. Warsh reiterated that the Fed will bring inflation back to its 2% target, emphasizing that this is a clear and fixed objective. He said: “My standard is that we must be confident that underlying inflation is moving toward our target, and the pace must be sufficiently clear and sufficiently fast. Otherwise, we still have work to do. That is our responsibility.” Warsh also noted that current financial conditions are not restrictive and that interest rates are the Fed’s “primary tool” for fulfilling its mandate. Warsh added: “Although the PCE and CPI data released this summer came in better than expected, they have not convinced me that the underlying trend of inflation has improved meaningfully.” “Market prices reflect the belief that we will achieve price stability. I can assure you that the market’s assessment is correct.” Warsh then stated that, with inflation above 2%, the Fed’s “primary focus at present should be on prices.” He said: “Let us also be clear on another aspect of our objective: price stability will not occur automatically, and inflation will not necessarily revert on its own. Achieving price stability is the Fed’s responsibility.” (Source: BlockBeats)