Warsh promised the Fed to implement a "paradigm change" in monetary policy and eliminate the "hidden tax" of inflation on the American people
Federal Reserve Chairman Kevin Warsh issued a speech at this week's congressional hearing on Tuesday, vowing to defeat inflation and formulate reasonable monetary policies. While expressing his stance on fighting inflation, the head of the central bank said that the fundamentals of the U.S. economy are solid and investment in the field of artificial intelligence will bring huge dividends to the economy. Warsh criticized the Fed's previous policies, pointing out that there were mistakes in the flexible average inflation target framework launched in 2020: No central bank just wants to slightly increase inflation, but in the end it leads to inflation crisis, this framework is a major mistake. All members of the Federal Reserve Board will never tolerate high inflation for a long time and will be firmly committed to restoring price stability. Federal Reserve Chairman Kevin Warsh called inflation an "unfair burden" and once again called on the Fed to complete a policy paradigm change on Tuesday. "Inflation is equivalent to an invisible tax levied on American people and businesses, and we are determined to completely eliminate this tax burden." He said, "This means that monetary policy must usher in a paradigm change, and we need to re-examine the various existing policy tools - some of them are effective, and some are completely ineffective." Warsh will attend committee hearings in both houses of Congress this week. His written speech will significantly strengthen his anti-inflation stance. At the same time, he is optimistic about the resilience of the U.S. economy and strongly praises the growth momentum brought by corporate investment (especially artificial intelligence-related investment). Warsh once again promised to formulate a monetary policy that adapts to the economy and completely resolve the inflation problem that has plagued the Federal Reserve for five years. The congressional hearing comes just two months after Warsh took office as Fed chairman. According to legal requirements, the chairman of the Federal Reserve must go to Congress twice a year to submit a monetary policy report and accept questions from lawmakers. "We are now at a critical turning point in history, and everyone must shoulder the responsibilities imposed by the times." Warsh will appear before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday. "The Federal Reserve's first priority is to formulate precise and adaptive monetary policies and do its best to stay close to the optimal path. This is our unchanging core goal and a beacon guiding us forward." He added, "As long as monetary policy adjustments are in place - and we will do it - the wave of rising inflation over the past five years will eventually end and become history." Warsh takes over the Fed at a time when U.S. inflation has continued to exceed the 2% policy target since 2021. At his nomination hearing earlier this year, he bluntly stated that inflation is the result of man-made policy choices; in his first press conference after taking office, he also repeatedly emphasized that lowering people's cost of living is his core task. Warsh further criticized the Fed's past policies, focusing on the flexible average inflation targeting mechanism implemented in 2020: This policy allows for periodic inflation to be higher than the 2% target after a period of low inflation, with the original intention of repairing labor market imbalances. "No central bank just wants to slightly increase inflation, but in the end it gets out of control and triggers a severe inflation crisis. This framework itself is a major mistake. This policy framework failed to achieve its set goals. I am gratified that the previous leadership had abolished this mechanism before I took office." Similar to the views of former Chairman Jerome Powell, Warsh said that long-term high inflation has placed an unnecessary heavy burden on American families and businesses, and the cost of operating and living in all walks of life has increased across the board. The sharp rebound in inflation this time is largely due to the surge in energy prices. "Monthly price fluctuations are unavoidable, especially in the context of global turbulence, but the mid- to long-term core inflation level is mainly determined by monetary policy." He said, "All members of the Federal Reserve Board will never tolerate inflation remaining high for a long time. We will work together and unswervingly restore price stability." Talking about the overall macroeconomic environment, Warsh said that the U.S. economy has maintained steady expansion and has shown strong resilience in the face of various external shocks. He pointed out that corporate investment is the most eye-catching feature of the current economy. "The growth rate of corporate investment continues to rise, and is even accelerating. The core driving force is the wave of new data centers in various places and the massive demand for supporting AI software and hardware equipment." “We have not yet determined exactly how much the expansion of the artificial intelligence industry will boost the economy, but we can foresee that expenditures that are now individually called ‘AI investment’ will only be broadly classified as regular business investments in the future.”
Warsh has previously proposed that the explosion of productivity brought about by artificial intelligence will have the effect of curbing inflation; however, many economists and internal policy members of the Federal Reserve are skeptical of this view. In addition, Warsh introduced in detail the five special working groups he led to establish, which will comprehensively review the entire operating system of the Federal Reserve, focusing on five major areas: policy communication mechanism, financial technology, balance sheet management, economic data statistical caliber, and inflation observation and analysis framework. Warsh said that the comprehensive review of the five major working groups marks a new chapter of development for the Federal Reserve and is also the implementation of the "policy paradigm change" he promised in the interview last year. However, unlike before, he took a more conciliatory stance after taking office as chairman, no longer blaming veteran employees within the Fed for causing systemic problems. “It is a great honor to return to the Federal Reserve and work with such dedicated and talented colleagues.” Open a futures account on Sina's cooperative platform, safe, fast and guaranteed
Warsh has previously proposed that the explosion of productivity brought about by artificial intelligence will have the effect of curbing inflation; however, many economists and internal policy members of the Federal Reserve are skeptical of this view. In addition, Warsh introduced in detail the five special working groups he led to establish, which will comprehensively review the entire operating system of the Federal Reserve, focusing on five major areas: policy communication mechanism, financial technology, balance sheet management, economic data statistical caliber, and inflation observation and analysis framework. Warsh said that the comprehensive review of the five major working groups marks a new chapter of development for the Federal Reserve and is also the implementation of the "policy paradigm change" he promised in the interview last year. However, unlike before, he took a more conciliatory stance after taking office as chairman, no longer blaming veteran employees within the Fed for causing systemic problems. “It is a great honor to return to the Federal Reserve and work with such dedicated and talented colleagues.” Open a futures account on Sina's cooperative platform, safe, fast and guaranteed