Warsh’s debut Fed press conference may reveal his strategy for inflation, rates

WASHINGTON - New Federal Reserve Chairman Kevin Warsh has talked at length in recent years about the U.S. central bank's balance sheet, the need to say less about interest rates and why it should not dip into issues like climate change.

A Fed press conference on Wednesday, though, will mark his first substantive comments from the chairman's perch about what's happening with inflation, unemployment and the economic outlook as he makes a rhetorical turn from the abstract words of a policy analyst to the concrete, potentially market-moving words of the world's most important central banker.

Inflation, in particular, seems stuck more than a percentage point above the Fed's 2% target, and Warsh's characterization about whether and when it is likely to fall will be a key first step in the evolution of monetary policy under his leadership.

It's one that investors will take as a cue about the likelihood of higher rates that many now see coming this year.

What might have been otherwise temporary price shocks, triggered by the Trump administration's import tariff hikes and elevated oil prices due to the U.S.-backed war with Iran, now threaten a more persistent inflation problem.

Meanwhile, the U.S. labor market is close to full employment, hiring has rebounded, and Warsh's colleagues in the Fed's regional districts hinted in a recent report at building wage pressures.

The press conference immediately following the end of the Fed's June 16-17 policy meeting will provide Warsh an opportunity to address those economic cross-currents as he builds a narrative about the risks he sees facing the central bank and how he plans to frame its response.

Warsh, who succeeded former Fed chief Jerome Powell about a month ago, "has been much more vocal in terms of the balance sheet, he's been much more vocal on communication strategy.

There will be much to unpack: Warsh's assessment of the impact of tariffs on goods prices; whether the recent oil price shock will persist and spread; whether, as recent data suggest, the improvement in inflation that had been coming from slowing rent prices has run its course. Those are the sorts of issues Powell, who remains on the Fed's Board of Governors, would address directly in his press conferences.