A divided Federal Reserve left interest rates unchanged on Wednesday even as US central bank chief Kevin Warsh pledged an unwavering commitment to bring inflation down, a message that left markets confused about just what he was prepared to do.
Warsh, in what has become characteristic fashion, declined during a press conference to offer any clues about what action would be needed to contain inflation that has held above the Fed's 2% target for more than five years, pledging only: "This Fed will not waver."
Reiterating that promise several times following a split decision by the policy-setting Federal Open Market Committee to leave its benchmark rate in the 3.50%-3.75% range, Warsh for the first time nodded explicitly to the idea that "any central banker" faced with a steady job market and rising underlying inflation would be "more inclined to tighten policy."
Although underlying inflation up until last month had been reaccelerating — driven by rising global fuel and food prices due to the war in the Middle East and surging business spending tied to artificial intelligence — Warsh did not offer a rate hike as necessarily the right answer.
"We are on the job, we will deliver, we are focused like a laser on making sure we can do it, but the suggestion that we're going to be able to do it with our magic wand is one I want to disabuse you and everyone else of," Warsh told reporters after a two-day policy meeting. "If inflation continues to be elevated through the forecast period, interest rates could well be part of that solution, but I wouldn't say it's in isolation."
