Fed chief Warsh faces hard choice on inflation after bond market’s ‘red flag’

Federal Reserve Chairman Kevin Warsh’s emphatic declarations on Wednesday that inflation would be brought down without signaling a readiness to raise interest rates triggered a sharp selloff in bonds that may force a hard choice: defying President Donald Trump’s desire for easier monetary policy or battling a growing cadre of fellow U.S. central bankers determined to tighten it. Complicating matters was Warsh’s hint that he may try to switch up the Fed’s yardstick for successfully containing inflation, for years defined ​as a 2% year-over-year rise in the Personal Consumption Expenditures Price Index. “That’s our number, we’re sticking with it,” Warsh said in a press conference after the end of a two-day policy meeting, before adding, “Who knows, come after next January, what we might say about strategy. I suspect the task forces might have something to add.” Warsh handpicked ⁠15 outside experts in May to deliver recommendations by the end of 2026 on the Fed’s conduct of monetary policy, including its inflation framework.

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