Federal Reserve Chairman Kevin Wosh reiterated the Federal Reserve’s “zero tolerance” for inflation that continues to exceed target levels during testimony before the U.S. House Financial Services Committee on Tuesday, and again put forward his proposal to push the Federal Reserve toward a “policy regime change.” He stated that the Federal Reserve will conduct a comprehensive review of its monetary policy framework and operational methods to ensure the full restoration of price stability. This marks the first time Wosh has submitted the semiannual Monetary Policy Report to Congress since he assumed the chairmanship of the Federal Reserve in May of this year.
Wosh pointed out during the hearing that the persistently high inflation over the past five years has become a heavy burden on American families and businesses, effectively imposing a “hidden tax” on the economy. “We plan to eliminate this tax burden. That means we need to drive policy regime change and re-examine those policy practices that have been effective or ineffective,” he said. He emphasized that the Federal Reserve’s most important goal at present remains formulating the correct monetary policy to ensure that the era of high inflation comes to a definitive end. “If we get policy right—and we will—the inflation surge of the past five years will eventually become history.”
Wosh introduced that since taking office, the Federal Reserve has established five special task groups to conduct comprehensive assessments of core areas including monetary policy communication, the balance sheet, the economic data system, productivity and employment, and the inflation policy framework. These task groups are currently conducting a ground-up comprehensive review of the Federal Reserve’s existing institutional arrangements and policy framework, with the goal of formulating a reform plan with substantive significance by the end of this year. Wosh stated that in just six weeks since taking office, new reform ideas have already begun to take shape within the Federal Reserve. “We have already driven a profound shift in mindset and will advance reforms in at least five important areas of monetary policy.”
Regarding the U.S. economic outlook, Wosh believes that the U.S. economy as a whole continues to expand steadily, the labor market remains broadly balanced, and business investment has become the most prominent bright spot at present. He pointed out that rapid growth in data center construction and demand for AI-related equipment and software is driving sustained expansion in corporate capital expenditures. “What is currently called ‘AI investment’ may in the future simply be ordinary ‘investment.'” However, he also stated that it is not yet possible to determine the extent to which AI will ultimately boost productivity in the economy, and the Federal Reserve will continue to monitor AI’s impact on inflation and the job market. During the hearing, Wosh emphasized that regardless of any political pressure from the outside, the Federal Reserve will adhere to making policy based on economic data.
