Federal Reserve Chairman Kevin Warsh told the Senate Banking Committee on Wednesday that 'inflation is a choice' and gave a firm pledge that persistently high price growth would not continue under his leadership — marking his first semiannual monetary policy testimony since taking office seven weeks ago. Warsh signalled that restoring price stability remains the US central bank's overriding priority, even as uncertainty persists over artificial intelligence, geopolitical tensions, and other economic headwinds.

Rate Decision and Warsh's Core Pledge

The Federal Open Market Committee (FOMC) left the federal funds rate unchanged at 3.5 to 3.75 per cent at its most recent meeting, Warsh confirmed. Addressing lawmakers directly, he said: 'The members of our committee have no tolerance for persistently elevated inflation, and we share a resolute commitment to restore price stability.' He added that if the Fed 'gets policy right — and we will — the inflation surge of the last five years will be a thing of the past.'

State of the US Economy

Warsh described the broader US economy as resilient. Economic activity is expanding at a solid pace, household consumption remains moderate, and manufacturing output has strengthened in 2025. Business investment — particularly in artificial intelligence infrastructure — has emerged as the economy's strongest driver, he noted. The housing sector, however, continues to lag behind other segments.

On Inflation Triggers and the Fed's Responsibility

Warsh acknowledged that individual price shocks — including those linked to energy markets and global conflicts — can temporarily push up costs. However, he stressed that the Fed's responsibility is to prevent such increases from becoming broad-based inflation. 'Our job,' he said, is to ensure that inflation does not become entrenched over the medium term, arguing that while policymakers cannot control individual commodity prices, they can stop higher prices from spreading across the economy.

When Senator John Kennedy pressed him on whether inflation would become permanent, Warsh replied: 'It's not going to be permanent under my watch, Senator.'

Five Task Forces and Internal Reviews

Warsh announced that the Federal Reserve has established five task forces to review communications, balance sheet policy, economic data, productivity and jobs, and the inflation framework. The reviews, he said, are intended to improve policymaking after what he described as 63 months of inflation above the Fed's target — a period spanning more than five years. The Fed also flagged both interest rate policy and its balance sheet as active monetary policy tools under review.

Political Pushback and Broader Context

Several Democratic senators pushed back, arguing that inflation has been driven in part by supply-side shocks rather than monetary policy failures. Senator Chris Van Hollen cited the conflict involving Iran and tariff policies as contributing factors. Warsh maintained that such developments can influence individual prices but do not diminish the central bank's responsibility for overall price stability. This comes amid a broader global debate over how much of the post-pandemic inflation wave was demand-driven versus supply-driven — a distinction with significant political implications as the Fed's credibility remains under scrutiny. Financial markets worldwide closely track Fed decisions, since shifts in US interest rates ripple through global borrowing costs, capital flows, and currency valuations.