Kevin Warsh Blasts Fed’s Inflation Strategy: 'We’re on a Dangerous Path

kevin warsh

When the hum of the city’s traffic stopped for a moment, an old economist named Kevin Warsh found himself standing on the threshold of a university lecture hall, not to teach a class, but to weigh in on a policy that had become a national conversation. Warsh had spent decades inside the Federal Reserve’s most confidential rooms, watching market forces and monetary policy collide in a delicate dance. Yet now, he carried a disquieting observation: the strategy the Fed had adopted to tame inflation appeared more like a tightrope walk over a chasm than a steady ground.

In the dim glow of the podium, Warsh chose his words with the gravity they deserved. He had never been one to flinch away from criticism, but his voice carried the weight of experience. The Federal Reserve’s current approach, emphasizing relentless tightening of monetary conditions, had steered the nation toward a future where modest rises in locked‑in prices could trigger a cascade of tightening on credit, wages, and investment. According to Warsh, this reactionary spur could push the economy into a recession that might have been avoidable with a more measured, forward‑looking strategy. He argued that the Fed needed to recognize that the very tools designed to blunt inflation could, in hindsight, compound the damage.

He didn’t frame his critique as a dismissive tone–a parade of cussed words or a rebuke. Instead, Warsh compared the current trajectory to a kid clinging to a broken kite. The kite, a metaphor for America’s fiscal policies, might seem powerful mid‑flight but eventually fragmented under pressure. He pointed to the fragile balance between incentivizing growth and restraining runaway price increases, saying the Federal Reserve was treating the balance with the same cautionary care it applies to a drunkard’s wobbly step: wretched and uncertain.

While the room’s attendees included policymakers and numbers‑crunchers, Warsh’s dissection resonated in quieter ways. Nearby graduate students shifted from restless chatter to earnest listening. From his seasoned perspective, he suggested a rebalancing act: keeping inflation expectations anchored, but carefully easing the measures that could disrupt path to employment. He emphasized hope, not doom—an advocacy for thoughtful recalibration, not a textbook indictment.

By the time the applause rippled through the hall, it was clear the cascade of decisions still lay ahead for the Fed. Yet Warsh’s voice had carved a new well‑of thought, reminding economists that the tightness of policy should not also become its own virtue or vice—lest the country stumble beyond the very inflation it sought to quell.

Kevin Warsh Blasts Fed’s Inflation Strategy: 'We’re on a Dangerous Path

Report Page