🔥Kevin Warsh: Prioritizing price stability, not rushing to be hawkish

Fed Chair Kevin Warsh delivered his first international speech at the ECB Forum (Portugal), which includes central banks such as the Fed, ECB, BoE, and BoC.
🔴Warsh's view is that inflation remains the focus:
- Repeatedly emphasized that "price stability" is the top priority, the 2% target is "strong, consensus-driven, unambiguous"
- Acknowledged that prices are "still too high" but expects inflation to have cooled in recent weeks
- Did not change the target even though the market is more optimistic about the disinflationary impact of AI
🔴Refused to provide interest rate guidance
- Did not submit an individual SEP forecast, continuing to defend the decision to drop forward guidance from the June FOMC meeting
- His view is that the Fed should let actual data drive market expectations, not the words of officials
-> 9/18 other FOMC members forecast the FFR at the end of 2026 to be higher than the current range.
🔴Balance sheet: Leaning toward continued tightening
- The balance sheet is currently at $6.7T, down from its peak near $9T (2022)
- "It took 18 years for the balance sheet to expand like that, it will take more than 18 weeks to bring it to a reasonable size"
- Views the balance sheet as a supplementary tool, interest rates remain the primary tool
- Committed to not rushing changes, the market will have time to prepare before any adjustments
Warsh remains cautious and did not provide any specific future guidance for the Fed, though still leaning hawkish.