Federal Reserve Chairman Kevin Warsh declares the 2 percent inflation goal on the PCE index is a firm and fixed target.

He acknowledged that the responsibility for 65 months of sustained elevated inflation sits with the Federal Reserve. Currently, PCE inflation is running at 3.7 percent year-over-year, while the six-month pace is above 4 percent. Warsh described the labor market as broadly consistent with full employment. He also noted that business investment in equipment and intangibles is advancing at a 9 percent clip, with more than half of that investment tied to artificial intelligence projects. Warsh warned that routine forward guidance can trap policymakers and market participants in a communication loop where each side reacts to each other's signals. He argued that short-term interest rates should remain the primary tool of monetary policy, while balance-sheet experiments and other unconventional measures should be used sparingly. He also highlighted artificial intelligence as a new variable that could influence productivity and help contain prices over time.