Fed Chairman Warsh's first speech before Congress: Vows to tame inflation and optimistic about the dividends of AI investment
Federal Reserve Chairman Kevin Warsh's latest pledge is that he will "make sure monetary policy gets back on track" and defeat the inflation problems that have plagued the central bank for the past five years. This week, Warsh will deliver speeches in the U.S. House of Representatives and the Senate. In a speech released in advance, he reiterated his recent tough stance on inflation, while emphasizing the resilience of the economy and praising the potential benefits of corporate investment, especially investment related to artificial intelligence. "Today, we are at a turning point in history," Warsh wrote in his speech.
Federal Reserve Chairman Kevin Warsh's latest pledge is that he will "make sure monetary policy gets back on track" and defeats the inflation problems that have plagued the central bank for the past five years. This week, Warsh will deliver speeches in the U.S. House of Representatives and the Senate. In a speech released in advance, he reiterated his recent tough stance on inflation, while emphasizing the resilience of the economy and praising the potential benefits of corporate investment, especially investment related to artificial intelligence. "Today, we are at a turning point in history," Warsh wrote in his speech. "We all need to rise to this moment." “The Fed’s primary goal is to get monetary policy right, or as close to it as possible. That is our clear and consistent goal, our North Star that guides us forward. If we get the policy right — and we will — then five years of soaring inflation will be a thing of the past.” Our committee members have zero tolerance for persistently high inflation, and we are deeply committed to restoring price stability. This is Warsh's first congressional testimony as chairman of the Federal Reserve. According to regulations, the chairman of the Federal Reserve must submit a monetary policy report to Congress twice a year and accept questions from members of Congress. During his confirmation hearing earlier this year, Warsh said that "inflation is not inevitable, it is actually an option for the central bank." Later, he repeatedly emphasized at his first press conference that lowering the cost of living is an important task during his term. Similar to former Chairman Jerome Powell, Warsh pointed out that persistently high inflation has placed an undue burden on American households and businesses. Consumers and businesses have been facing rising cost pressures across the board, and the latest round of heightened inflation is largely due to soaring energy prices. "While monthly price fluctuations are inevitable - especially in a world of uncertainty - in the longer term, underlying inflation is primarily determined by monetary policy," Warsh said. "Committee members cannot tolerate persistently high inflation and share a strong commitment to restoring price stability." When it comes to overall economic conditions, Warsh said the U.S. economy is "expanding at a solid pace and showing resilience in the face of recent shocks." He singled out corporate investment as "the most striking feature" of the current economic environment. “The rapid growth in investment – and it appears to be accelerating – largely reflects the huge demand for data center construction and the AI-related equipment and software needed to populate these data centers.” "We don't yet know how much the economy will ultimately benefit from the construction of AI infrastructure. The new opportunities in the economy also bring new challenges to policymakers, and the central bank is paying close attention to its impact on inflation and the labor market." Warsh has previously said he expects the wave of productivity gains brought about by AI to have a disinflationary effect. However, this view has been questioned by some economists and some policymakers within the Federal Reserve. Warsh is also preparing to introduce the five working groups he has just established, which will conduct a comprehensive review of the Fed's operating system, covering areas such as policy communication, technology, balance sheets, the economic data used by the Fed and the way inflation is assessed. Warsh said the working groups together constituted a "new chapter for the Fed" and a continuation of the "system shift" he promised last year. However, unlike his previous attitude of criticizing "vested interests" within the Fed for causing institutional problems, Warsh's tone was relatively mild after taking office. "It is an honor to return to the Federal Reserve and once again work with so many talented and dedicated colleagues," Warsh wrote. (