Warsh press conference: The economy is strong but inflation remains too high; the FOMC meeting schedule will be adjusted.
2026-10-29 03:22:23
On October 28, local time, the Federal Reserve announced after a two-day monetary policy meeting that it would maintain the target range for the federal funds rate at 3.75% to 4%. The Federal Open Market Committee (FOMC) approved the decision by a 10-2 vote, with Governor Lisa Cook and Cleveland Fed President Beth Hammark voting against a 25-basis-point rate hike. Fed Chairman Kevin Warsh subsequently gave a detailed explanation of the economic situation, inflation outlook, interest rate transmission, and the internal operations of the committee at a press conference. 
Strong Economic Growth and Positive Employment and Investment Performance In his opening remarks, Warsh gave a positive assessment of the current economic situation. He pointed out that economic growth has clearly strengthened. The GDP growth rate for the first half of the year was revised upward from the previously estimated 1.8% to 2.4%, and the growth rate in the third quarter appears to be even faster, possibly exceeding 3%. Domestic spending remains resilient, business investment is expected to grow at a double-digit rate, capital expenditure as a percentage of GDP is at a historical high, and growth is no longer confined to a few sectors; high-tech investment is leading the acceleration. Employment is also positive. The unemployment rate is low, employment is growing healthily, the rate of job growth is higher than last year, and the four-week average of unemployment insurance claims is at its lowest level in decades. Warsh stated that the full employment side is performing "quite positively," the economy is moving in the right direction, and most officials do not believe the economy is overheating, but rather that it is showing strong momentum. He specifically mentioned the continued rise in productivity, and that most of the productivity improvements occurred before the large-scale application of artificial intelligence. Faster economic growth does not necessarily lead to inflation, and while the Committee's measurement of aggregate demand is not perfect, the overall signal is satisfactory. Inflation Remains Too High; 2% Target Remains Firmly Anchored Despite a strong economic performance, Warsh repeatedly emphasized that inflation was "too high" and that reducing inflation was the Fed's responsibility. The committee's discussions focused primarily on price stability. He clearly stated that the price stability target, as measured by the PCE, is 2%, with no "soft target" or implied room for easing. "We will achieve price stability; there are no excuses or conditions." Warsh noted that while energy and related prices have risen in recent weeks, and oil futures prices have increased, leading to some short-term inflation expectations, long-term indicators show that households and businesses remain confident in the Fed's ability to achieve price stability. Inflation compensation, as measured by inflation swaps, is moving in a favorable direction. The committee has clearly stated its readiness to act, and information over the coming period will help determine the appropriate policy stance. Achieving price stability is not dependent on a fixed date or a single data point. Since the September rate hike ("removing a dose of easing"), credit conditions have tightened, credit spreads on some assets have widened, and market participants are more cautious in their capital allocation. However, Warsh stressed that he neither wants nor can call current financial conditions "tightening," and that these changes contribute to the path towards price stability. Interest Rates Have a Real Impact on AI Investment Wash explicitly expressed skepticism regarding previous market claims that "tech giants are insensitive to interest rates." He pointed out that interest rates affect almost everything, and since early September, they have had an impact both within and outside the tech sector. Capital spending is strong and expanding, and market participants are beginning to differentiate between different types of investment. Interest rates do have an impact on new technologies and AI infrastructure development, and are not decoupled from other parts of the economy. Rejecting Forward Guidance, Political Factors Absent Wash repeatedly emphasized that he does not presuppose the meeting's outcome and does not trust forward guidance under normal circumstances (unless a crisis occurs). He stated that there is abundant information in the coming period, and the committee will assess more data before making a judgment, and will not offer specific opinions on the December meeting. Political factors "did not play any role" in decision-making; no political or election-related content was heard during the two days of discussions. FOMC Meeting Schedule to be Adjusted, Providing More Room for Strategic Discussions Wash announced a significant institutional change: changing the FOMC meeting schedule starting next fall. The committee believes that eight meetings per year remain appropriate. Eight meetings will still be held in 2027, but one will be dedicated to policy strategy, without voting on interest rates or the statement. In 2028, two meetings will focus on strategic discussions, with the remaining six for policy formulation. These strategic meetings are not formal policy decision-making meetings and are not expected to issue interest rate decisions or regular policy statements. He explained that proper policy formulation requires both timely assessment of recent developments and allowing time and space for diverse committees to engage in longer-term strategic thinking. This is another institutional choice to get monetary policy operations back on track. The relevant working groups are working diligently, with some expected to be completed by the end of the year. Balance sheet-related recommendations are expected to be submitted in the first quarter of next year. Any adjustments will be made after careful consideration of the working group's opinions and are unlikely to affect the current policy juncture. Market Reaction and Outlook During Warsh's speech, the three major US stock indices rose briefly, the US dollar index fell at one point, and spot gold rebounded after increased volatility. After the press conference, the 10-year US Treasury yield rose, as the market is still digesting expectations for the future path. Overall, while acknowledging the strong economy and the initial effectiveness of policies, Warsh remained highly vigilant about inflation and declined to provide a clear timetable for the next steps. The next FOMC meeting is scheduled for December 8-9.
Strong Economic Growth and Positive Employment and Investment Performance In his opening remarks, Warsh gave a positive assessment of the current economic situation. He pointed out that economic growth has clearly strengthened. The GDP growth rate for the first half of the year was revised upward from the previously estimated 1.8% to 2.4%, and the growth rate in the third quarter appears to be even faster, possibly exceeding 3%. Domestic spending remains resilient, business investment is expected to grow at a double-digit rate, capital expenditure as a percentage of GDP is at a historical high, and growth is no longer confined to a few sectors; high-tech investment is leading the acceleration. Employment is also positive. The unemployment rate is low, employment is growing healthily, the rate of job growth is higher than last year, and the four-week average of unemployment insurance claims is at its lowest level in decades. Warsh stated that the full employment side is performing "quite positively," the economy is moving in the right direction, and most officials do not believe the economy is overheating, but rather that it is showing strong momentum. He specifically mentioned the continued rise in productivity, and that most of the productivity improvements occurred before the large-scale application of artificial intelligence. Faster economic growth does not necessarily lead to inflation, and while the Committee's measurement of aggregate demand is not perfect, the overall signal is satisfactory. Inflation Remains Too High; 2% Target Remains Firmly Anchored Despite a strong economic performance, Warsh repeatedly emphasized that inflation was "too high" and that reducing inflation was the Fed's responsibility. The committee's discussions focused primarily on price stability. He clearly stated that the price stability target, as measured by the PCE, is 2%, with no "soft target" or implied room for easing. "We will achieve price stability; there are no excuses or conditions." Warsh noted that while energy and related prices have risen in recent weeks, and oil futures prices have increased, leading to some short-term inflation expectations, long-term indicators show that households and businesses remain confident in the Fed's ability to achieve price stability. Inflation compensation, as measured by inflation swaps, is moving in a favorable direction. The committee has clearly stated its readiness to act, and information over the coming period will help determine the appropriate policy stance. Achieving price stability is not dependent on a fixed date or a single data point. Since the September rate hike ("removing a dose of easing"), credit conditions have tightened, credit spreads on some assets have widened, and market participants are more cautious in their capital allocation. However, Warsh stressed that he neither wants nor can call current financial conditions "tightening," and that these changes contribute to the path towards price stability. Interest Rates Have a Real Impact on AI Investment Wash explicitly expressed skepticism regarding previous market claims that "tech giants are insensitive to interest rates." He pointed out that interest rates affect almost everything, and since early September, they have had an impact both within and outside the tech sector. Capital spending is strong and expanding, and market participants are beginning to differentiate between different types of investment. Interest rates do have an impact on new technologies and AI infrastructure development, and are not decoupled from other parts of the economy. Rejecting Forward Guidance, Political Factors Absent Wash repeatedly emphasized that he does not presuppose the meeting's outcome and does not trust forward guidance under normal circumstances (unless a crisis occurs). He stated that there is abundant information in the coming period, and the committee will assess more data before making a judgment, and will not offer specific opinions on the December meeting. Political factors "did not play any role" in decision-making; no political or election-related content was heard during the two days of discussions. FOMC Meeting Schedule to be Adjusted, Providing More Room for Strategic Discussions Wash announced a significant institutional change: changing the FOMC meeting schedule starting next fall. The committee believes that eight meetings per year remain appropriate. Eight meetings will still be held in 2027, but one will be dedicated to policy strategy, without voting on interest rates or the statement. In 2028, two meetings will focus on strategic discussions, with the remaining six for policy formulation. These strategic meetings are not formal policy decision-making meetings and are not expected to issue interest rate decisions or regular policy statements. He explained that proper policy formulation requires both timely assessment of recent developments and allowing time and space for diverse committees to engage in longer-term strategic thinking. This is another institutional choice to get monetary policy operations back on track. The relevant working groups are working diligently, with some expected to be completed by the end of the year. Balance sheet-related recommendations are expected to be submitted in the first quarter of next year. Any adjustments will be made after careful consideration of the working group's opinions and are unlikely to affect the current policy juncture. Market Reaction and Outlook During Warsh's speech, the three major US stock indices rose briefly, the US dollar index fell at one point, and spot gold rebounded after increased volatility. After the press conference, the 10-year US Treasury yield rose, as the market is still digesting expectations for the future path. Overall, while acknowledging the strong economy and the initial effectiveness of policies, Warsh remained highly vigilant about inflation and declined to provide a clear timetable for the next steps. The next FOMC meeting is scheduled for December 8-9.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
