Warsh answers the July minutes on restrictiveness

Chairman Kevin Warsh delivered “In Our Time” on 28 August 2026 at “Financial Innovation: Implications for Payments and Policy,” the economic policy symposium sponsored by the Federal Reserve Bank of Kansas City at Jackson Hole, on what he called his “100th day as Chairman.”¹ He set out principles for the conduct of policy, a reading of the economy and a passage on forward guidance — introducing his own outline with the line “just don’t call it forward guidance.”¹ The address follows the minutes of the 28-29 July meeting, published on 19 August (see July FOMC minutes record the Chairman’s case for a six-meeting calendar).²

1. On the question the minutes left open, the Chairman comes down further than the participants who raised it. The July minutes record that “[s]ome participants commented that financial conditions might not currently be sufficiently restrictive to facilitate a return of inflation to 2 percent.”² The speech goes past insufficiency to the category itself: “Credit and loan markets are showing few signs of policy restraint,” and though “[c]ertain sectors—like housing and agriculture—are showing strains,” on balance “I would be hard pressed to describe broad financial conditions as restrictive.”¹

2. The inflation objective is restated as fixed, and as something the Fed has to actively produce. “[T]he Fed’s price-stability objective of 2 percent, as measured by the personal consumption expenditures (PCE) price index, is a firm, fixed target,” the speech says, adding that “[p]rice stability is not self-executing, nor is inflation necessarily mean-reverting. It is the Fed’s job to deliver stable prices.”¹ The test he sets is that “we must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed.”¹

3. Breadth, not the headline rate, carries the reading. Warsh disaggregates “the 199 individual components of the PCE price measure”: over the past twelve months 54 percent of goods and services in the basket showed price increases above 3 percent, against a post-pandemic high of about 77 percent and 32 percent across the two decades before the pandemic, with 49 percent annualised over six months.¹ He allows that “this summer’s PCE and CPI readings were better than expected” while holding that “they do not tell me that underlying trends have meaningfully improved.”¹

4. He cites the Committee’s unanimity on the diagnosis, which sits alongside its division on the remedy. The speech invokes “the unanimous view of the FOMC” that “[l]abor markets were stable, and output was solid. But inflation remained too high,” and describes “[a] good majority of my colleagues and I” as having preferred to await new information before deciding whether to change rate policy.¹ The July decision to hold the target range at 3½ to 3¾ percent was approved 9-3, with dissents by Hammack, Kashkari and Logan.³ Agreement on the reading and disagreement on the action are distinct, and the speech asserts only the first.¹³