The New Fed Chairman’s Debut

By SBE Council at 18 June, 2026, 10:29 am

by Raymond J. Keating -

There were three key takeaways from the Federal Reserve on June 17: the Federal Open Market Committee's announcement on monetary policy, the statement on the economy and economic projections from Federal Reserve Board members and Federal Reserve Bank presidents, and the impressive debut of Kevin Warsh as Federal Reserve chairman.

As for the FOMC announcement, it was vastly slimmed down from what we've seen in the past. It was brief and straightforward. The federal funds rate would be maintained in the target range of 3-1/2 to 3-3/4 percent - as most expected. Also, the committee "reaffirmed its policy of maintaining ample reserves in the banking system." That second point was vague enough that we need to see what the Warsh Fed actually does regarding the monetary base (i.e., currency in circulation plus reserves), given that it has been far too ample since 2008.

As for the economy, according to the FOMC statement, "Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little." While it's hard to agree that economic growth has been "solid," capital investment surely has been the key ingredient for the growth we have experienced.

Meanwhile, the economic projections from board members and bank presidents, once again, offered an interesting range of expectations. Real GDP growth projections ranged from 1.8 percent to 2.6 percent for 2026, with a median of 2.2 percent, and 1.9 percent to 2.9 percent, with a median of 2.3 percent, for 2027. Notice that no one at the Fed is pointing to growth exceeding 3 percent, which was the post-WWII average for real growth through 2006. We are in a period of diminished expectations for the U.S. economy, and when slower growth takes hold (as it has since 2007) that means diminished wealth and well-being for Americans.

For good measure, expectations regarding PCE inflation came in at a range of 3.5 percent to 3.7 percent for 2026, and 2.2 percent to 2.5 percent for 2027. If that comes true, it's another case of the Fed failing on its main purpose, i.e., price stability.

Interestingly, though, the new Fed chairman, Kevin Warsh, did not shy away from Fed responsibility on this front. He emphasized the Fed's role in price stability. In his opening statement, he declared, "We recognize that inflation has been running well ahead of the Fed's long-stated inflation goal of 2 percent that's been going on for more than 5 years. Persistently high prices are a burden for the American people. But the recent past need not be prologue. I am pleased to report that members of the FOMC are unambiguous and unanimous: This Committee will deliver price stability."

In fact, Warsh went so far as to reiterate his previous declaration that "inflation is a choice." He responded to a press question by saying, "In the Fed's review of its strategy over the last any number of years, in January, the Fed, including the strategy that we're still bound by, the Fed statement says that inflation is primarily determined by monetary policy. You bet it is. I've said for years inflation is a choice. You bet it is." Warsh is absolutely correct, and this blunt honesty from a Fed chairman is refreshing and encouraging.

Indeed, perhaps most auspicious and promising were his comments that despite what had been long declared by previous Fed chairmen, Warsh doesn't believe in a tradeoff between inflation, and economic and/or employment growth. He clearly declared:

"I don't believe that we have a cruel choice. I don't share the view that was expressed a few generations ago that Federal Reserve chairmen show up at a podium and say you've got to choose. And you're going to have to decide whether you're willing to tolerate higher inflation to put more people at work. I don't believe in that. What I believe is if we do our job, we can make strong growth, low prices, and strong employment mutually compatible. So what you heard from the Committee today is we've got some work to done the price stability front."

That's vital for a Fed chairman - along with the rest of the Fed - to understand, and yet, over the years, few have. If policy follows the fundamental understanding that strong growth and low inflation are not at odds, then the Warsh Fed era holds great promise.

Indeed, not only is inflation a choice, but so has been the slow growth that we've been experiencing for nearly two decades.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. He is the author of " The Weekly Economist " book series, and 10 Points from Walt Disney on Entrepreneurship .