Kevin Warsh made it clear he won’t spill details about his talks with the president: “I have no information for you regarding my discussions with the president.” In his comments, Warsh laid out an updated macro outlook and the Fed's monetary policy stance, backing it up during his livestream appearance.

Economy and Inflation

Over the past seven weeks, macro data has signaled that the economy is on stronger footing. Still, the inflation trend isn’t moving fast enough to hit the Fed’s targets—there’s been little change on that front since the last meeting. The latest inflation prints haven’t given the Fed much reason to rethink concerns about persistent price pressures.

Fed Policy and Financial Conditions

According to Warsh, financial conditions aren’t exactly tight, so the Fed decided to pull back some of its economic stimulus. The central bank isn’t basing decisions on any single data point, not even CPI: what really counts are sustained trends, since individual numbers can be off.

He broke down the reasons for the rate hike into three changes since July: the economy and labor market have gotten stronger, inflation isn’t cooling fast enough, and the Fed’s view of geopolitical risk has shifted. Warsh also pointed to three drivers behind rising Treasury yields—a robust economy, capital competition, and geopolitics.

Labor Market and AI

Warsh emphasized that hitting the Fed’s inflation goal doesn’t have to come at the expense of the labor market. The Fed’s keeping a close watch on AI developments, and a dedicated working group is set to deliver an AI report to the Fed by the end of the year.