WASHINGTON — New Federal Reserve Chairman Kevin Warsh used his first post-meeting news conference to signal a broad overhaul of the central bank’s operations, announcing a series of internal reviews while emphasizing a renewed focus on inflation as policymakers confront rising price pressures linked to the conflict with Iran.
As the CU Daily reported here, Federal Reserve officials indicated in their latest economic projections that a rate increase later this year remains possible if inflation accelerates further, particularly as higher energy prices stemming from the Iran conflict work their way through the economy.
The FOMC adjourned its meeting without changing rates.
Warsh, who took over leadership of the central bank earlier this year, unveiled five task forces that he said would examine key aspects of Federal Reserve policymaking and operations.
“These topics are timely, consequential, and worthy of a fresh look,” Warsh said, according to CNN, adding that he was enlisting “some of the very best minds, both inside and outside the economics profession.”
Task Force Focus
The task forces will focus on Federal Reserve communications, including whether to continue publishing the quarterly Summary of Economic Projections; management of the Fed’s balance sheet; the central bank’s use of economic data; productivity and employment in a changing economy; and the Fed’s inflation framework.
Warsh said most of the reviews should be completed by year-end and would begin with a reassessment of fundamental assumptions and current practices before recommending potential policy changes.
Shorter Statement
The announcement capped a meeting that differed noticeably from those conducted under former Chairman Jerome Powell. CNN reported that the Fed’s policy statement was shortened, Warsh’s news conference was briefer than those typically held by Powell, and the chairman suggested additional changes could be forthcoming.
One notable departure involved the Fed’s quarterly economic projections. Warsh, a longtime critic of the forecasts, declined to submit his own projections for this meeting.
He also signaled a retreat from the practice of providing forward guidance on future interest-rate moves, a communications tool heavily used during Powell’s tenure.
Warsh said policymakers deliberately chose not to offer any indication of where rates may be headed.
“That was not well-suited to the current policy conjuncture,” he said, according to CNN.
2% Inflation Rate Remains Goal
Despite declining to provide guidance on future rate decisions, Warsh stressed the central bank’s commitment to returning inflation to its 2% target.
“We have the capability and commitment to deliver on our price stability objective of 2%,” Warsh said. “The commitment to deliver is strong, unanimous, and unambiguous. And that’s an important message we’ve missed for five years. And we’re going to fix that.”
As the CU Daily has reported, Warsh faces a delicate balancing act as inflation concerns grow. President Donald Trump selected Warsh in part because of expectations he would lower interest rates, but most members of the Federal Open Market Committee now expect either no rate changes or a possible rate increase later this year. Only one policymaker projected a rate cut in 2026, according to the report.
View from America’s Credit Unions
America’s Credit Unions Chief Economist Curt Long said in a statement after the meeting, “New Chair Warsh has long been a critic of FOMC communications and its use of forward guidance, and the committee’s June statement was significantly shorter and less detailed than usual. The FOMC’s economic projections, or so-called ‘dot plot’, showed that half of committee participants expect a rate hike in 2026. An increase in interest rates is clearly defensible given the solid condition of the labor market and rising inflation, but that will pile more pressure on borrowers in the short run. More than ever, credit unions stand out as the most affordable source of credit in the marketplace.”
Scrutiny of Renovation Project
Warsh also addressed scrutiny surrounding the Federal Reserve’s ongoing $2.5 billion headquarters renovation project in Washington.
He said he has already met with Federal Reserve Inspector General Michael Horowitz, who is reviewing the planning and execution of the project. Warsh said a report is expected later this summer examining whether any irregularities occurred.
The renovation has drawn criticism from Trump and his allies, who have cited cost overruns as evidence of mismanagement, CNN reported. The Justice Department previously reviewed the matter but closed its inquiry earlier this year and deferred further examination to the inspector general.
Warsh said he wants to determine whether the central bank can improve oversight of the project and ensure it is meeting its obligations responsibly.
“I’m eager to see if there’s anything we can do to be good stewards of taxpayer money and make sure that we’re delivering on the promises that we made,” he said, according to CNN.
The Federal Reserve is self-funded and finances the renovation through its own earnings rather than taxpayer appropriations.
