ContextSemiannual testimony of the Fed Chairman before the House Committee on Financial Services, presenting the Monetary Policy Report to Congress.
Why it mattersThe first report to Congress under the new Fed Chair, announcing a review of the inflation framework and of the data the Fed relies on.
- Inflation has surged over the last five years.
- AI investment may change the economy in unknown ways.
- Policymakers need better and faster data.
- Get policy right to put the inflation surge behind.
- Set up task forces to review practices from first principles.
- Review the inflation framework and improve data sources.
Read the speech summary
1. Policy and the economy
In his first testimony on the Monetary Policy Report to the Senate Banking Committee, Fed Chair Kevin Warsh paid tribute to Alan Greenspan and stressed that getting policy right is the Fed's central aim: the committee has no tolerance for persistent high inflation and held the funds rate at 3.5-3.75% in June. Activity is solid, with business investment the standout, driven by data centres and AI equipment (equipment spending up about 8% and high-tech about 25% over four quarters); he expects AI investment soon to be called simply investment. Productivity has been strong even before AI gains, and the labour market is stable, with few layoffs and solid wage growth.
2. Five task forces
He has set up five task forces, each starting from first principles: communications (how the Fed deliberates and conveys decisions); balance sheet policy and the ample-reserves regime; new data sources and methods; productivity and jobs, covering new general-purpose technologies; and inflation frameworks, asking whether current models explain prices. The aim is to put the years of high inflation behind the Fed and make it ready for its task and forward-looking. He added that reporting to Congress is an obligation that keeps the Fed accountable alongside its independence in conducting policy.