Federal Reserve Chair Kevin Warsh on Wednesday declined to provide detailed explanations on how the central bank might respond to potential economic changes, including the impact of artificial intelligence on inflation and his contacts with President Donald Trump. Warsh, in his second day of congressional testimony, sought to evade a range of questions from senators.
Warsh, who has been Fed chair for seven weeks, stated his intention to offer less forward guidance on interest rate decisions than his predecessors. He suggested that while increased investment in AI infrastructure might raise measured prices over the next 12 months, whether that constitutes inflation is a determination for the Federal Reserve. "I don’t view a one-time change in prices as necessarily being inflationary, because I think there’s a supply response," Warsh said.
He also downplayed recent inflation data that suggested a cooling trend. On Tuesday and Wednesday, government reports indicated a slowdown in wholesale inflation and a decrease in consumer prices from May to June, the first such drop in six years. Yearly inflation cooled to 3.5% in June from 4.2% in May. Despite these figures, Warsh described them as "imperfect measures of the state of underlying inflation" and stated he would rely on a task force he established to study the data sources used by the Fed.
Regarding his relationship with President Trump, Warsh reiterated his commitment to acting independently and resisting political pressure. Trump has frequently called for lower interest rates. However, Warsh did not directly confirm whether he has communicated with Trump since his appointment. "I don’t want to be in the business of sharing discussions that the president and I have," Warsh responded to a question from Sen. Chris Van Hollen. He added, "I will tell you what I’ve said to the president repeatedly and said to the Treasury secretary: they chose an independent guy to do the job and that’s exactly what I plan on doing."
This comes in the context of Trump's repeated criticism of Warsh's predecessor, Jerome Powell, for not lowering interest rates sufficiently. The Trump administration had also initiated an inquiry into Powell's testimony regarding a building renovation by the Fed, raising concerns about the central bank's independence.