On policy:
• He gave no timetable for a rate hike and said the speech should not be viewed as forward guidance or a formal reaction function
• Short-term interest rates remain the Fed’s main policy tool
• A “good majority” at the July meeting thought waiting was the wiser course
• Longer-term Fed task-force recommendations will have no bearing on current policy decisions
• The Fed needs market signals to remain “as unfiltered as possible”
On Macro:
• Economy “appears to have strengthened”
• Consumer spending remains healthy, labor markets stable
• Business investment is rising rapidly
• Financial conditions are hard to describe as restrictive
• Credit and loan markets show few signs of policy restraint
On inflation:
• Price stability is the Fed’s “predominant focus” right now
• Summer inflation data were better than expected, but underlying trends have not meaningfully improved
• Progress on inflation over the past two years has been modest
• Fed’s 2% PCE target is “firm and fixed”
• If the Fed cannot be confident inflation is moving toward 2% “clearly and at sufficient speed,” Warsh said “we have work to do”
• Inflation expectations remain broadly stable, but “tend to look durable until they don’t” and must be watched closely
Also:
• Wage growth is moderate, but Warsh does not view wages as a reliable predictor of future inflation
• Market pricing still shows confidence that the Fed will ultimately deliver price stability
TLDR: Warsh did not explicitly call for a hike, but he made clear that current policy does not look particularly restrictive and that persistent inflation would require the Fed to act.