Speaking at the Jackson Hole symposium, Kevin Warsh said the Fed needs to be sure inflation is steadily heading toward its target. If progress is too slow, the Fed has “more work to do.” Price stability is the top concern right now, he said, and the 2% PCE target isn’t changing. These points came up in his Jackson Hole talk.

Inflation and the Fed’s Priorities

This summer’s inflation numbers came in better than expected, but Warsh cautioned it’s too soon to call a real trend shift. In his view, the Fed’s main job right now is zeroing in on inflation and sticking to its price stability mandate. The 2% PCE target is set in stone—the Fed’s job is to get there.

Financial Conditions and the Economy

Financial conditions aren’t exactly tight. Consumer spending is holding up, and the labor market is solid—basically at full employment. Warsh stressed the need to keep an eye on how high expectations for capex and corporate profits are playing into the economy.

Signals for Market Players

The Fed’s focus on inflation signals they’re ready to act if price drops stall out. With demand still strong and a tight labor market, the Fed will keep tweaking policy to stay on track for that PCE goal.