Breaking: Fed Chair Warsh says they are not happy with inflation above 2%

Federal Reserve (Fed) Chairman Kevin Warsh reiterated that he will not be giving forward guidance on policy, while participating at a panel at the ECB Forum on Central Banking 2026.

"We'll chart a new course so we can make better decisions," Warsh added.

Key takeaways

"It's up to the central bank to decide if AI is inflationary."

"AI boom it's showing itself first and very prominently in the US."

"Exciting, consequential time to be a central banker."

"The US is likely to be a big winner in AI."

"It's not a zero sum game."

"We are only in the first or second inning of this revolution."

"Labor markets are steady."

"Supply side is solid."

"We're in the price stability business."

"We've looked around and see that prices are too high."

"Expectations of inflation over the first four weeks have come down."

"Inflation risks have come down."

"If anyone thought we'd be happy with inflation above 2%, they will be disappointed."

"We'll be an independent central bank."

"Volatility is down, yields are down."

"Will likely have news next week on leaders of task forces."

"Potential growth looks like it has trended up."

"If last 4 quarters an indication, there is reason to be optimistic."

"Have not changed view on balance sheet in first four weeks at the Fed."

If there is a change in balance sheet policy, decision will be well deliberated and communicated."

"Balance sheet borders on fiscal policy."

"Want interest rate policy to be the key policy tool."

Warsh shuns forward guidance as Fed weighs AI’s inflation risk

Fed Chair Warsh delivered a moderately hawkish message, with a 5.6/10 FXS Speechtracker score suggesting a cautious but not aggressive stance relative to the historical average. The refusal to give forward guidance, coupled with a strong reaffirmation of the 2% inflation goal and emphasis that the central bank will judge whether AI is inflationary, underscores a data-dependent, price-stability-first approach even as Warsh highlights the United States as a likely big winner from the AI boom. Overall tone signals confidence in steady labor markets and a solid supply side, but no tolerance for sustained inflation above target.

The FXS Fed Sentiment Index was virtully unchanged, remaining at a firmly hawkish 123.64, indicating that the speech did not materially shift the broader policy tone captured by the index. The combination of a stable FXS Fed Sentiment Index and a mid-range FXS Speechtracker score points to continuity in the Fed’s hawkish bias, with markets likely to focus on the lack of forward guidance and the evolving assessment of AI’s inflation implications for the Dollar.