Ankara: US Federal Reserve Chair Kevin Warsh said Wednesday that the central bank's decision to leave interest rates unchanged should not be viewed as a pause in its inflation fight. He stressed that policymakers remain prepared to act. The Federal Open Market Committee voted 9 - 3 to keep the federal funds rate target range between 3.5% and 3.75% at Warsh's second policy meeting as chair. 'I wouldn't characterize what we did as anything like a pause,' Warsh said at a news conference after the decision. He described the meeting as a 'rigorous review of the economic situation,' focused on major unresolved questions and the work officials must complete before deciding next steps.

According to Anadolu Agency, Warsh said the decision not to alter rates was 'the beginning of the story, not the end of the story,' and characterized the approach as 'watchful thinking, not watchful waiting.' Fed policymakers remain committed to returning inflation to the Fed's 2% target after more than five years of above-target price increases. Warsh emphasized, 'There is no soft inflation target. There is no soft implicit target,' adding, 'There's only a target, and it's 2%.'

Warsh mentioned that the committee did not place significant weight on the latest core inflation reading when deciding to hold rates. When asked about the impact of the June data on the decision, Warsh replied, 'In two words, not much.' Instead, the Fed is focused on broader trends rather than any single economic release. 'If inflation continues to be elevated through the forecast period, interest rates could well be part of that solution,' he stated.

Warsh highlighted discussions on how recent supply shocks, energy disruptions, tariff increases, and strong artificial intelligence-related investment were affecting inflation, output, and employment. They also examined whether price increases in chips and other AI-related equipment reflected sector-specific pressures or a broader inflationary dynamic.

Warsh pointed out a significant increase in nominal and inflation-adjusted Treasury yields since the previous Fed meeting 42 days ago. Some of the increases in market interest rates between meetings ranked among the largest in the last two decades, he said. Although the Fed did not raise its policy rate, financial markets had already tightened conditions in response to inflation data and resilient economic growth.

Warsh argued that the Fed's reduced reliance on forward guidance had allowed markets to respond more directly to economic developments. He also emphasized that the US economy remained resilient, supported by solid output growth, a stable labor market, and strong business investment. Investment in AI-related equipment and software had grown by nearly 20% in the previous four quarters, supporting manufacturing output and laying the groundwork for future growth.

Despite three dissenting votes, Warsh noted that policymakers broadly agreed on the Fed's objectives and commitment to price stability, while differing about the strategy and timing of future action. 'There was a large majority support for the decision that we made in the room,' he said. 'But there's nothing inertial about that discussion.'