New Fed Chair Harker’s First Congressional Hearing: “Zero Tolerance” for High Inflation, Names AI Investment as the Biggest Bright Spot for the Economy

The newly appointed chairman of the U.S. Federal Reserve (Fed), Kevin Warsh, has held his first semiannual Congressional hearing since taking office. In his written statement, he took a hawkish tone, stressing “zero tolerance” for persistently high inflation, and reaffirmed his commitment to defending the Fed’s independence. Warsh refused to provide specific interest-rate forward guidance, emphasizing that decisions will be based on data. At the same time, he specifically singled out the “AI investment boom” as the most striking feature of the U.S. economy today.
(Backgrounder: Fed’s mouthpiece: Warsh’s first major decision—whether to “reverse course” on last year’s rate cuts)
(Additional context: No commitment to a July rate cut! In his international debut, new Fed chairman Warsh challenged “inflation is too high,” launching a tough rebuttal to Trump’s interference)

The U.S. Federal Reserve’s monetary policy is entering a brand-new era. Taipei time on the evening of July 14, 2026, Kevin Warsh, who took office as Fed chair in May this year, made his first appearance in the House Financial Services Committee as chairman for the semiannual Monetary Policy Report (Humphrey-Hawkins hearing).

Facing recent inflation data that has cooled somewhat but remains sticky, along with mounting political pressure during an election year, Warsh set the tone in his opening remarks with a tougher yet pragmatic roadmap for the Fed going forward. He stuck to his approach of “saying less and letting the market interpret,” not only refraining from providing clear forward guidance on either rate cuts or hikes, but also signaling to the market his firm determination to thoroughly crush inflation.

“Zero tolerance” for high inflation—refusing forward guidance

Warsh issued a clear warning at the hearing, emphasizing the Fed’s “zero tolerance” for persistent high inflation, and pledged to make high inflation “a thing of the past.” He noted that although the newly released June Consumer Price Index (CPI) saw what is said to be the largest drop in recent years (down 0.4% month over month), the current inflation rate (personal consumption expenditures price index at about 4.1%) is still far above the 2% long-term target, imposing an unnecessary heavy burden on American households and businesses.

On policy communication, Warsh carried out his reform vision by sharply reducing “forward guidance” to the market. He said the future interest-rate path will be entirely “data-dependent,” allowing the market to price rates based on actual economic indicators. With the benchmark rate currently maintained in the 3.5% to 3.75% range, despite differences within the Fed over whether to raise rates again before year-end, Warsh himself still refused to disclose his personal dot-plot forecasts.

The AI investment boom becomes an economic highlight—reaffirming central bank independence

When assessing the outlook for the U.S. economy, Warsh believes the overall economy remains “solid,” and that the labor market is holding steady. Most notably, he described the “artificial intelligence (AI) investment boom” as the “most striking feature” of the current economy. The Fed is currently closely monitoring AI’s potential impact on the real economy. While AI can significantly boost productivity, the demand for related infrastructure could also push up energy prices such as those for semiconductors and electricity.

In addition, in response to the chorus outside the election year calling for rate cuts, Warsh reiterated the Fed’s “independence” at the hearing, stressing that monetary policy will absolutely not be swayed by political pressure. He also revealed that the Fed has set up five project teams to conduct a comprehensive review of central bank communications, balance-sheet run-off, data usage, and the inflation framework in order to further improve policy effectiveness. As the hearing moves into the Q&A session, the market is closely watching these hawkish remarks and how they may shape the subsequent trajectories of risk assets such as U.S. stocks and cryptocurrencies.