Fed Chairman Kevin Warsh testifies before Senate Banking Committee

Summary

In his first semiannual testimony as Fed Chair, Kevin Warsh emphasized a historic AI-driven capex boom, reaffirmed the Fed’s unwavering commitment to fighting inflation, and announced five task forces to reform central bank operations. He stressed US dominance in AI and a preference for interest-rate policy over an expanded balance sheet, while fending off sharp questioning on ethics, independence, and the labor-market impact of artificial intelligence.

• A generational capex surge is under way, led by AI-related equipment, software, and infrastructure; high-tech spending rose 25% in Q1 2026.
• Warsh declared that restoring price stability is the Fed’s number-one objective and that inflation “is a choice.”
• Five task forces were created to overhaul communications, balance sheet policy, data usage, productivity/jobs, and the inflation framework.
• He signaled a desire for a leaner balance sheet and for interest rates to be the main monetary-policy tool.
• The Chairman argued the US is uniquely positioned to extract productivity gains from AI, which will ultimately benefit American workers.
• While manufacturing and investment are booming, he noted the housing sector continues to lag.
• Monetary aggregates (M2) were reintroduced into the policy report as a cross-check on inflation.
• Senators grilled Warsh on ethics, alleged coziness with Wall Street, and the potential for an AI bubble harming retirement savings.