Signing you in

“Inflation is a choice. The members of our committee have no tolerance for persistently elevated inflation, and we share a resolute commitment to restore price stability,” Warsh said in his opening remarks to House and Senate lawmakers on July 14 and 15, respectively.

The discussions were also marked by lawmakers’ concerns about how an AI investment boom will impact employment, whether Warsh will prioritize everyday Americans over Wall Street, and the task forces he’s created to help reshape the central bank.

Warsh, in what has become a running theme for the new Fed chair, didn't offer insight one way or the other on the Fed’s next interest rate decision on July 29, but his congressional testimony provided hints regarding where he thinks the U.S. economy and Fed are headed.

Year-over-year inflation, or the rate of price increases on U.S. consumer goods, has remained elevated over the past five years. It shot up after the start of the COVID-19 pandemic and reached 9% in 2022 before beginning to slow.

Since the start of the Iran war on Feb. 28, it’s gone back up. It jumped from 2.4% in February to 4.2% in May, driven in large part by the rising cost of gas tied to blockades in the Strait of Hormuz that have limited the global oil supply. It slowed to 3.5% in June – the same month in which the U.S. and Iran reached a temporary cease-fire agreement President Donald Trump has since called "over."

During the July 15 hearing, Sen. John Kennedy, R-Louisiana, asked Warsh whether he thought this inflation would be permanent or temporary.

ING Chief International Economist James Knightley said in a note to USA TODAY that Warsh’s commitment shouldn’t be seen as all that surprising, as maintaining price stability is one of the Fed’s primary roles. Its other is maintaining maximum employment.

"If you really take [Warsh's] statements at face value, the obvious implication would be – as long as inflation is above target – you should just be going hammer and tongs, raising interest rates as much as you need to," said Skanda Amarnath, Employ America executive director and former NY Fed analyst. "I think in practice that's not true. I don't think he's going to just use every opportunity to raise interest rates, because there are trade-offs."

Rep. Sean Casten, D-Illinois, asked Warsh how effective the Fed's monetary policy can be if it is at odds with policies enacted by the Trump administration.

“Because I don’t really understand the theory or the case that interest rates undo tariffs or that interest rates undo high oil prices,” Casten said. “Do you have the tools to counter them?”

“We have tools that are powerful,” Warsh replied, adding the Fed takes changes in trade policy, immigration policy, and military conflict into account when it makes decisions.

“Often, they have an effect on prices in the short term,” Warsh said. “Our business is whether those prices in the short term end up spreading out.”

Warsh partially addressed the Trump administration's crackdown on immigration when Sen. Thom Tillis, R-North Carolina, asked him whether net zero immigration would harm U.S. economic growth.

“Immigration policy is set by you and the administration,” Warsh said, adding that those decisions do affect the nation's potential gross domestic product, which is the result of how many hours people work and their productivity.

After two reports this week showed inflation cooled in June, Warsh called the Bureau of Labor Statistics’ Consumer Price Index and Producer Price Index “imperfect measures” of underlying inflation. He said he hopes the data and inflation framework task forces will give agencies like the BLS ideas to “do a better job in an evolving economy.”

Much attention was paid to those Warsh chose to lead the productivity and jobs task force. They are Andreesen Horowitz co-founder and general partner Marc Andreesen, Stanford University economics professor Charles Jones – who is currently on leave at Anthropic – and Microsoft executive vice president and XBOX CEO Asha Sharma.

“Can you understand why a task force that is led by people, in large part, who are likely to get richer by AI might not be the most credible people to folks on the ground who are doing the work, who are worried about what impact this AI is going to have on their jobs?” Sen. Tina Smith, D-Minnesota, asked.

“I would expect, before they come to their conclusions, they are going to hear from folks that will be affected. They are going to hear from employers that are getting struck with this technology shock and have disruption in their labor force,” Warsh replied. “I think they are incredibly talented, and we will make sure to take both parts of our dual mandate in consideration of their output.”

As Americans fear AI-related layoffs, Warsh remained optimistic that the technology will make the United States richer and more productive in the long run.

His comments came just days after more than 200 economists and researchers signed a joint statement calling on policymakers to "act now" and address the risks AI poses, including large-scale job displacement.

“I believe that this is a long-term job creator, but will it be disruptive and will some people have their jobs at jeopardy because of the new technologies?” Warsh said. “On that, I can’t offer any sort of guarantee or comfort.”

He added that large AI investment in the private sector makes him optimistic that the U.S. economy will ultimately benefit from large-scale adoption.

“When the private sector deploys this amount of capital, they must see something shiny at the other end of that rainbow,” Warsh said. “They must see a very good return on investment. … I tend to think that private investment has a multiplier way higher than one."

Democratic lawmakers continued questioning Warsh's independence from Trump, who has attempted to exert unprecedented influence over the central bank in his second term.

"The president has not, before I took this office, before I raised my right hand, he has not tried to influence the conduct of monetary policy," Warsh said, adding that he is guided by data and the law. "If he tried to, I would continue to keep my head down and do the job."

Warsh and other members of the Federal Open Market Committee voted to keep its benchmark interest rate unchanged after his first meeting as chair in June. Trump's response at the time? "Whatever."

"The biggest open question from this all is sort of: How can we have confidence that the stances Chair Warsh takes and the decisions he ultimately makes are motivated by economic reasoning, evidence-driven, data-driven analysis, and not this political shadow that just looms large?" Amarnath said, adding that Warsh's advocacy for less forward guidance doesn't help calm people's fears. "It would have loomed large over any choice for Fed chair, to be clear. But I think it's something harder to dispel if you're saying less, not more."