Warsh at Jackson Hole urges limited Fed forward guidance
Fed Chair Kevin Warsh said forward guidance should be limited and over-sharing can mislead markets, firms and households. He stressed confidence that underlying inflation is moving toward the 2% PCE target or “more work to do.”
At Jackson Hole, Fed Chair KEVIN WARSH said forward guidance should be limited; communication transparency is not an end in itself and over-sharing deliberations or over-committing on future decisions can mislead markets, firms and households.
He said policymakers must be confident that underlying inflation is moving toward the 2% PCE target or "there is more work to do"; inflation data have not shown a clear improvement in trend and medium-term inflation expectations remain broadly stable.
The Fed's 2% PCE objective is a firm, fixed target and the Fed's current primary focus should be on prices.
Credit and loan markets show little sign of policy tightening and financial conditions are not restrictive; interest rates are the Fed's "main tool." Warsh said the probability of substantially stronger growth has risen, Main Street and Wall Street have shown surprising resilience, and the labor market is relatively stable.
He flagged artificial intelligence as a new variable for the economy and policy implementation, and described early engagement with working-group leaders on reforms as encouraging.