Arabic version: تصريحات وورش تُبقي احتمال رفع الفائدة قائماً

According to Cnbc, investors interpreted Federal Reserve Chairman Kevin Warsh’s second press conference as dovish, while his prepared remarks indicated a firmer stance on inflation. Long-term Treasury yields rose after his comments, while the dollar fell and gold rose.

Warsh did not celebrate a June consumer price index report showing prices fell 0.4% from the previous month. Speaking for the Federal Open Market Committee, he said that more than five years of above-target inflation could not be cured “in nine weeks — or by a single month of modest price decreases.”

In his opening statement, Warsh stressed that the Fed’s inflation objective remains unchanged. “There is no soft inflation target, there is no soft implicit target — not on this Committee’s watch. There is only a target, and it is 2 percent,” he said. He also said the Fed would not hesitate to act where necessary and appropriate.

The chairman said the committee had discussed monetary policy tools and strategies for achieving stable prices, including how much accommodation comes from the Fed’s balance sheet. Warsh has advocated shrinking that balance sheet, a move that could tighten financial conditions. The committee was not ready to act on the balance sheet, and task forces examining reforms are not expected to report before the end of the year.

Warsh’s later answers to reporters created confusion about inflation policy and the Fed’s price measures. Yet his prepared remarks, combined with two inflation reports due before the September FOMC meeting, leave open the prospect that persistently hot inflation could lead him to support a rate increase.