Warsh, Semiannual Monetary Policy Report to the Congress
SPEECH DIGEST
HAWKISH low confidence · 8.0k characters readWarsh's first Humphrey-Hawkins testimony as Chair. No new policy signal: funds rate held at 3-1/2 to 3-3/4 percent, economy described as expanding at a solid pace with a stable labor market and strong productivity, and the inflation language is firm to the point of being a commitment device. The real content is institutional: five task forces covering communications, the balance sheet and ample-reserves regime, data sources, productivity/AI, and the inflation framework itself.
What’s new: Nothing new on the near-term rate path: no hint on the next move, no calendar, no conditions. What is new is the scope and structure of the Warsh review agenda: five named task forces with explicit charges, including an open re-examination of the ample-reserves regime and the composition of asset holdings, and a framework/models review. Also new is the emphasis placed on AI capex as the most striking feature of the economy and on strong productivity growth predating AI adoption.
KEY FINDINGS
- Rate held at 3-1/2 to 3-3/4 percent with the June meeting described as focused on restoring price stability, and the Committee said to have "no tolerance for persistently elevated inflation." Sets a high bar for cuts under the new Chair: front-end pricing of near-term easing gets no encouragement here.
- Task force to review balance sheet policies "including the ample-reserves regime and the composition of asset holdings" and consider alternatives. A live possibility of a regime change in reserves and in the maturity mix of holdings: matters for bills-versus-coupons supply, repo, and the belly of the curve.
- Task force on inflation frameworks will ask whether current models give an empirically robust view of prices and output. Signals the 2025 framework is not settled; reaction function could shift again, adding term premium uncertainty.
- Business investment described as rapid and "appears to be accelerating," with high-tech spending near 25 percent four-quarter growth, plus strong productivity growth predating AI. A supply-side productivity story argues for tolerance of strong growth without tightening; the demand side of the AI buildout is flagged as an inflation and labor risk to monitor. Two-sided.
- Communications task force will examine the efficacy and risks of how the Committee deliberates and conveys policy choices. Puts the SEP, dots and post-meeting statement format in play: changes there alter how the market reads guidance.
FROM THE DOCUMENT
The members of our Committee have no tolerance for persistently elevated inflation.
This was the focus of our June meeting, at which we decided to hold the target range for the federal funds rate at 3-1/2 to 3-3/4 percent.
The second task force will review the Fed's balance sheet policies, including the ample-reserves regime and the composition of asset holdings.
The most striking feature of the economy right now is business investment.
Testimony Before the Committee on Financial Services, U.S. House of Representatives
Chairman Warsh submitted identical remarks to the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, on July 15, 2026. Chairman Hill, Ranking Member Waters, and other members of the Committee—good morning. It's a privilege to join you. At my first appearance before this panel, I am particularly honored to represent my superb colleagues throughout the Federal Reserve System. In submitting the Board's Monetary Policy Report, I think of a long line of central bank chiefs who came before Congress in keeping with the Federal Reserve Act. I think also of earlier efforts, going back to the time of the Framers, to create a central bank that would endure and serve the nation's founding principles.