SINTRA, Portugal — Kevin Warsh said inflation risks had eased in the weeks since he took over as chair of the Federal Reserve, as he reiterated his pledge to deliver price stability after an extended period in which the central bank had missed its 2% target.
“Expectations of inflation over the first four weeks of this period, they’ve come down. Inflation risks have come down,” Warsh said on Wednesday at the European Central Bank’s annual gathering of international policymakers and economists in Sintra, Portugal.
Warsh spoke on a panel alongside Christine Lagarde, president of the European Central Bank; Andrew Bailey, governor of the Bank of England; and Tiff Macklem, who heads up the Bank of Canada.
Central bankers from around the world have been grappling with how to respond to the jump in inflation caused by higher energy prices from the war in Iran, as well as a boom in artificial intelligence that has stoked prices. A preliminary ceasefire deal between the United States and Iran recently sent oil prices back to prewar levels. Still, especially in the United States, measures of underlying inflation, which strip out volatile categories such as food and energy, remain high.
For policymakers, the difficult question is whether they need to raise interest rates to extinguish high inflation, or whether they can afford to be patient and wait for inflation to retreat on its own.