Fed chair says US central bank charting ‘new course,’ repeats no forward guidance

Federal Reserve Chair Kevin Warsh said on Wednesday that the US central bank is “charting a new course” and repeated that policymakers will not offer forward guidance on the path of interest rates.

Speaking at the European Central Bank’s annual Forum on Central Banking in Sintra, Portugal, Warsh said the Fed would avoid signaling its next policy move ahead of the Federal Open Market Committee’s July 28-29 meeting.

“We’re going to chart a new course,” Warsh said. “I want us to have a good family fight when we meet in four weeks,” he added, referring to the upcoming rate decision.

Warsh said at his first press conference as Fed chair last month that policymakers agreed forward guidance was “not well-suited to the current policy conjuncture.”

“At my press conference, I said we’re not going to give forward guidance because we’re meeting in six weeks,” he said. “I have an update for you,” he added, noting that the next meeting is now four weeks away.

The Fed held interest rates steady last month, keeping the federal funds rate target range at 3.5% to 3.75% in a unanimous vote.

However, policymakers’ updated projections showed growing support for rate hikes this year as inflation runs at its fastest pace since 2023. Half of 18 Fed officials projected at least one rate increase this year, though Warsh declined to provide his own rate forecast.

Warsh added that the Fed would review whether to permanently scale back the use of forward guidance through a broader internal process. In June, he announced five task forces covering communications, the balance sheet, use of data, productivity and jobs, and the central bank’s inflation framework.

Inflation, Fed autonomy

Warsh said expectations for inflation have moderated in recent weeks, noting a decline over the past month.

However, he stressed that price levels across the US economy remain elevated and reaffirmed the central bank’s commitment to its 2% inflation goal.

He said anyone expecting the Fed to accept inflation above 2% would be mistaken.

He added that while inflation risks have eased, the Fed will continue to operate independently.

He said the central bank will remain independent and emphasized that there have been no changes in its autonomy.

AI transformation

Warsh said the US stands to gain significantly from advances in artificial intelligence, while acknowledging uncertainty about how quickly the technology will influence employment.

He said the US is likely to be a major beneficiary of AI and that there is a serious question about when its effects on jobs will materialize.

He described the AI surge as still being in its early phases, saying it is only in the first or second stage of the transformation.

Regarding its impact on the workforce, Warsh said he expects AI to contribute to stronger long-term outcomes, adding that employment is likely to increase and prosperity expected to improve.