He made the statement shortly after the FED, as predicted, raised interest rates for the first time in three years.
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“Our main focus is on the part of our mandate related to price stability. It is clear that inflation is too high and has remained so for too long,” he said during a press conference.
The FED leader also emphasized that financial markets did not influence the decision to raise interest rates.
“We made this decision today based on our assessment of the situation,” he said. “I will watch market prices and see what they indicate. But today’s decision was made by us.”
Speaking about the central bank’s independence, K. Warsh stated that the FED’s independence comes from staying focused on its goals.
“One part of the FED’s independence is that we stick to our course,” said K. Warsh. “We allow those conducting trade and fiscal policy to also stick to their course. That is how we can stand here and assess the situation as we see it.”
Earlier on Wednesday, the FED raised the base interest rates by 25 basis points for the first time in three years. The FED Open Market Committee unanimously decided to increase the interest rate range to 3.75–4 percent, citing elevated inflation. The committee also noted that the rate hike will help achieve the 2 percent inflation target faster.
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The world’s largest economy has been facing higher inflation for several years. Prices surged due to the war with Iran initiated by U.S. President Donald Trump, his tariff policies, and the ongoing artificial intelligence boom.
In its latest economic forecasts, the FED raised its preferred inflation indicator – the personal consumption expenditures (PCE) price index – forecast for this year by 0.1 percentage points to 3.7 percent.
The FED also increased the GDP growth forecast by 0.1 percentage points to 2.3 percent.
The FED had not changed interest rates since January, deciding to wait to assess the impact of energy price spikes and to allow the tariff effects on prices to spread throughout the economy.
However, at the July meeting, a quarter of the committee members disagreed with the decision not to change interest rates and urged an immediate increase. Since then, other policymakers, including K. Warsh himself, have hinted that if inflation does not slow significantly, the FED may need to take action.
Inflation data released last Friday showed that the consumer price index in August, compared to July, remained unchanged at 3.4 percent but still significantly exceeds the FED’s long-term target of 2 percent.
Wednesday’s decision is the first time the FED has raised interest rates since 2023. Such a move will undoubtedly anger President D. Trump, who launched an unprecedented campaign to pressure the independent central bank to lower interest rates to stimulate economic activity.
