Chairman Kevin Warsh delivers remarks following the Fed's decision to leave rates unchanged

Summary

Fed Chairman Kevin Warsh held his second press conference after the FOMC left rates unchanged. He stressed the Fed's unwavering commitment to the 2% inflation target, dismissing any soft implicit target. Warsh highlighted two economic developments: a sharp inter-meeting rise in Treasury yields as markets react to data rather than Fed guidance, and a remarkable surge in AI-related business capex that is pushing up prices of memory, logic chips, and AI infrastructure. The committee discussed persistent inflation, supply shocks, and the balance-sheet's role, maintaining a hawkish, data-dependent posture.

• FOMC voted 9-3 to hold the federal funds rate at 3.50-3.75%.
• Chairman Warsh strongly reaffirmed the 2% inflation target with no flexibility.
• Nominal and real Treasury yields rose materially since the prior meeting, a rare magnitude change.
• Warsh viewed the yield rise as a positive shift toward market-driven rate discovery.
• Business investment, especially AI capex, expanded at nearly 20% annually over four quarters.
• The AI capex boom is driving higher prices for memory/logic chips and AI infrastructure.
• The committee grappled with whether chip price increases signal broader inflation or are isolated.