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2026-07-14 20:36:25
[Wash's Tough Stance on "Zero Tolerance," July Rate Hike Remains Uncertain] ⑴ Federal Reserve Chairman Warsh pledged to Congress on Tuesday to resolutely curb inflation, emphasizing that the Federal Open Market Committee "has zero tolerance for persistently high inflation," but did not specify whether this month's meeting would raise interest rates or remain on hold, continuing his consistent stance—the Fed should not reveal its next move in advance. ⑵ His written testimony did not mention price shocks caused by tariffs or geopolitical conflicts, nor did it define the criteria for judging the "persistence" of inflation. Instead, he emphasized that the Fed's goal is singular and its success is promising, stating that if policies are appropriate, the inflation problems of the past five years will become history. ⑶ Warsh believes the labor market is "generally stable," with few layoffs and robust wage growth. Strong increases in labor productivity provide room for economic expansion. He is particularly concerned about investment in artificial intelligence construction, saying it is accelerating and presenting new challenges for policymaking. ⑷ Last year, the Fed cut interest rates three times due to concerns about a weakening labor force, but the economy's resilience exceeded expectations. Instead, it faced price pressures from import tariffs, geopolitical and energy disturbances, and AI construction, with inflation consistently hovering between 3% and 4%. (5) Waller, a board member who pushed for rate cuts last year, clearly stated this week that a rate hike should be on the agenda at the July meeting, bluntly stating that "watching inflation until it melts is not a viable option." Currently, the market's pricing in a rate hike this month remains at a certain level. (6) Warsh only took office as chairman in May of this year. Previously, Trump had exerted unprecedented pressure on the Federal Reserve, including publicly demanding rate cuts and attempting to remove board members. Warsh's unequivocal commitment to inflation is consistent with his stance of defending the central bank's credibility, and also adds more uncertainty to the subsequent policy path.
