JACKSON, Wyo. — Federal Reserve Chair Kevin Warsh is scheduled to deliver a closely watched speech today in Wyoming, where investors and economists will be looking for clues about how the relatively new central bank chief intends to combat inflation that remains well above the Fed’s target.
Warsh will speak at the annual gathering of economists and policymakers at Jackson Lake Lodge; an event Fed chairs have traditionally used to communicate their views on the economy and monetary policy to a broader audience.
Investors were disappointed last month when Warsh pledged to bring stubborn inflation under control but offered few details about how he plans to do so, NPR reported.
“I’d like to hear him be a bit more communicative,” Kathy Bostjancic, chief economist at Nationwide, told NPR. “We’re not talking forward guidance. Just some understanding of how he views the inflation dynamics right now.”
The Fed’s preferred inflation gauge showed prices increased 3.7% during the 12 months ending in July. That was down from 4.1% in May but remained well above the central bank’s 2% target, NPR noted.
Investors Trying to Read New Fed Chair
Warsh took over leadership of the Federal Reserve in May and has pledged to control inflation after several years of elevated price increases.
But he has been reluctant to provide investors with a detailed roadmap for interest rates, instead arguing that businesses and financial markets should focus more on economic conditions than signals coming from policymakers in Washington, NPR reported.
NPR said some economists expect Warsh to maintain that broad approach during his first Jackson Hole address as Fed chair rather than offer specific guidance about what the central bank will do over the next several months.
The ‘High Mountain Air’
Warsh offered a preview of the questions occupying his attention after Fed policymakers voted last month to leave interest rates unchanged.
“If I could, in the high mountain air in Jackson, Wyoming, I’d like to also frame the big questions,” Warsh said. “What’s really happening with productivity? What’s really happening with demographics? What’s really happening to the global economy amid the shocks?”
Investors currently see about a one-in-three chance that the Fed will increase its benchmark interest rate when policymakers meet in mid-September, according to NPR.
Warsh declined last month to say what direction his Jackson Hole address would take.
“I look at it like a blank piece of paper right now,” Warsh said, according to NPR. “I haven’t made a decision whether it’s going to be a big-picture speech or more of a set-up of all the action that we’re going to have between September and December.”
AI Could Complicate Inflation Fight
One issue likely to figure into the Fed’s longer-term economic outlook is artificial intelligence.
Warsh has expressed optimism that AI-driven productivity improvements could eventually help reduce inflation. In the short term, however, the AI investment boom is contributing to higher costs in areas including construction labor and computer memory chips, NPR reported.
Matthew Luzzetti, chief U.S. economist at Deutsche Bank, said the technology’s inflationary impact could change over time, NPR said.
“In the near term at least, there’s clear evidence that AI is an inflationary force,” Luzzetti told NPR. “But there’s hope that over the medium term, if we look several years out, it will begin to be a disinflationary force by lifting productivity growth, making the economy far more productive, and therefore putting downward pressure on prices as we look ahead.”
