Fed Chair Warsh Scraps Flexible Inflation Policy, Vows "Regime Change" to 2% Target

Fed Chair Kevin Warsh just dropped a bomb on Capitol Hill, declaring the central bank's 2020 "flexible inflation" framework a "mistake." He's pledging a full "regime change," ditching any tolerance for persistently high inflation.

That 2020 policy, under then-Chair Powell, allowed inflation to run moderately above 2% if it had been below, and crucially, tolerated hotter prices to support employment. Warsh slammed this employment-focused tradeoff, arguing it gave the Fed cover to let inflation rip.

Now, Warsh is drawing a hard line: the Fed's sole mandate is price stability at 2%, no ambiguity, no tradeoffs. He's already launched five internal task forces to rebuild the Fed's operations from communications to its balance sheet.

This hawkish pivot comes even as June inflation data cooled, though economists are flagging new AI-driven inflation risks. Warsh's message is clear: the cleanup is on, and the Fed is back to basics.