Warsh says Fed's main focus should be on prices, as central bank's rate policy in focus

Federal Reserve Chair Kevin Warsh on Friday delivered his first keynote at the annual monetary policy conference in Jackson Hole, Wyoming, against a backdrop of uncertainty over inflation and how he will guide policymakers as they consider interest rate moves.

Warsh's speech comes as the Federal Reserve has held interest rates steady at each of its five meetings so far this year amid persistent inflation, which moved further away from the central bank's 2% target amid the Iran war.

The annual Jackson Hole conference, which features central bank leaders from around the world, is historically an opportunity for the Fed chair to reset expectations about monetary policy and give perspective on how economic conditions are developing over the near and long term.

Warsh is opposed to giving so-called forward guidance about how policymakers will approach upcoming monetary policy moves and has taken steps to remove such language from the Fed's post-meeting statements. That has left some Fed watchers hoping for a clearer view into how Warsh evaluates incoming data and views the economy's path ahead.

The Fed chair offered an overview of his speech, joking that it could be called an outline or trail map but not forward guidance. He said he plans to discuss the practice of forward guidance and how markets and the central bank interact. He also said he would address the impact of artificial intelligence (AI) on the economy, key principles for monetary policy and his current view of the economy.

"With the unchanging picture of the Tetons as our backdrop, we are here to survey an economic landscape that is anything but static," Warsh said, saying the world is at a hinge point in history.

He said progress in AI has been faster than anticipated and that the "potential for substantially higher growth is on the rise. Ever-expanding pools of capital pouring into AI-related infrastructure of all sorts. A kind of super Moore's law seems to be playing out."

Warsh noted the Fed created an AI task force that will track things like the impact of AI on productivity, jobs and employment, how the industry is developing and how returns are accruing across the labs, chipmakers, energy producers and cloud providers driving it.

On forward guidance, the Fed chair acknowledged his "long-time discomfort with early pronouncements of future policy decisions" and offered his own view that "transparency and communications about future policy decisions is not an end unto itself."

"Forward guidance as a regular practice was adopted by my colleagues and me during the global financial crisis . It was essential at the time, and we introduced it with much fanfare. But as with other legacies of crises past, I believe the practice has outstayed its welcome," he explained.

Warsh said that, in ordinary times, forward guidance should be "limited and circumscribed" because. otherwise, it would risk "creating ambiguity in the name of clarity over sharing policy deliberations and committing to future decisions that can lead markets, businesses and households astray."