Federal Reserve Chairman Kevin Warsh strongly reasserted the central bank’s operational independence and its unwavering commitment to crushing inflation, warning markets that the Fed will not tolerate price growth above its long-standing target.

Speaking at the European Central Bank forum in Sintra, Warsh explicitly dismissed speculation regarding potential political pressure from President Trump for lower interest rates.

“We’ve been an independent central bank for a very long time,” Warsh stated. “We’re going to be an independent central bank at this moment, and you’re going to see no changes on that.”

Warsh noted that a recent Supreme Court ruling in favor of Fed Governor Lisa Cook further solidifies this boundary, reaffirming that the central bank can execute its mandate completely insulated from political or judicial interference.

The Chair’s aggressive tone comes as the Fed’s preferred inflation gauge, the core Personal Consumption Expenditures (PCE) index, climbed to 3.4% in May—its highest level since October 2023. Central bank officials have also revised their core inflation projections upward to 3.3%, pressured by volatile energy markets and a surge in demand driven by artificial intelligence.

Warsh flatly rejected any tolerance for elevated prices. “If there were people… who thought that this central bank was going to be comfortable with an inflation objective above 2%, well, I guess they’d be disappointed,” he said. In a significant shift from his predecessors, Warsh reiterated his refusal to provide forward guidance ahead of the Fed’s meeting in four weeks, arguing that the economy works best when the central bank does not coddle Wall Street with forecasted policy steps. Warsh emphasized that interest rates remain the fairest and most effective primary tool of monetary policy, alongside his ongoing goal of shrinking the Fed’s balance sheet.

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Source: https://finance.yahoo.com/economy/policy/article/kevin-warsh-fed-will-not-be-comfortable-with-inflation-above-2-183000837.html