New Fed Chair Kevin Warsh Shifts Focus Away from Employment Goal
8 reported2 unconfirmed
According to a single-source NPR report, new Federal Reserve Chair Kevin Warsh appears to be prioritizing price stability over maximum employment, the two components of the Fed's dual mandate. The report notes that Congress gave the Fed this dual mandate in the late 1970s. Warsh, appointed by President Trump, has expressed skepticism about the Fed's 2020 language describing maximum employment as a "broad based and inclusive goal." During his first press conference last month, Warsh stated he does not share the view that the Fed must decide whether to tolerate higher inflation to put more people to work. The report says Warsh believes low prices and strong employment can be mutually compatible, but he did not elaborate on jobs. Economist Claudia Sahm, a former Fed employee, observed that the Fed's recent statement removed an explicit reference to maximum employment, raising questions about how Warsh would respond if the labor market weakened.
What’s reported
The Federal Reserve has a dual mandate from Congress: price stability and maximum employment.
New Fed Chair Kevin Warsh appears to be leaning toward price stability and away from full employment as equal goals.
The dual mandate was established in the late 1970s.
In 2020, the Fed described maximum employment as a "broad based and inclusive goal."
Warsh expressed skepticism about that phrasing during his first press conference last month.
Warsh said he does not share the view that the Fed must decide whether to tolerate higher inflation to put more people to work.
The Fed's recent statement removed an explicit reference to maximum employment, according to economist Claudia Sahm.
Sahm said it is unclear how Warsh would define maximum employment or respond if the labor market weakened.
Open questions
How Kevin Warsh defines maximum employment.
Whether the Fed would act to support the labor market if it weakened under Warsh's leadership.
Key figures
Kevin Warsh, new Federal Reserve Chair
Claudia Sahm, economist and former Federal Reserve employee
Wailin Wong, NPR reporter
Darian Woods, NPR reporter
Sources: NPR
