WASHINGTON (AP) — Federal Reserve Chair Kevin Warsh on Wednesday sought to evade a range of questions from senators on issues such as the impact of AI on inflation, what contacts he has had with President Donald Trump, and how the central bank will determine the persistence of inflation.
Warsh has said since taking office seven weeks ago that he would provide less guidance about the Fed’s next interest rate moves than his predecessors. Yet he has frustrated
many Fed-watchers by largely avoiding explanations of how the central bank might respond more generally to potential economic changes.
“I don’t view a one-time change in prices as necessarily being inflationary, because I think there’s a supply response,” he said in response to a question on the impact of massive investment in AI infrastructure. “Will it increase measured prices over the course of the next 12 months? I suspect it will be. Whether that’s inflationary or not, that’s up to the Federal Reserve, and we’re going to have something to say about that.”
In his second day of congressional testimony, Warsh also downplayed positive inflation data released Tuesday and Wednesday that could make his job as Fed chair easier. As inflation fades, it reduces pressure on the Fed to raise its key interest rate to cool borrowing and spending.
The government said earlier Wednesday that wholesale inflation slowed in June, a day after consumer prices were reported to have fallen from May to June for the first time in six years. On a yearly basis, inflation cooled to 3.5% last month from 4.2% in May.
“Any central banker would be happy to have data going in the right direction,” he said, but “these are all imperfect measures of the state of underlying inflation.”
Instead, Warsh said he would look to a task force he has created to study the sources of data the Fed uses.
Separately, Warsh reiterated that he would act independently as Fed chair and resist any political pressure from Trump, who has often demanded lower interest rates. But he did not directly answer whether he has communicated with Trump since his appointment.
“I don’t want to be in the business of sharing discussions that the president and I have," Warsh said in response to a question from Sen. Chris Van Hollen, a Democrat from Maryland.
“I will tell you what I’ve said to the president repeatedly and said to the Treasury secretary: they chose an independent guy to do the job and that’s exactly what I plan on doing,” he added.
Trump repeatedly attacked Warsh's predecessor, Jerome Powell, for not cutting interest rates deeply enough, and his administration even pushed an investigation into brief Senate testimony by Powell on a building renovation by the Fed, raising widespread concerns about the Fed's independence.
