Fed Chairman Kevin Warsh underwent two days of questioning in Congress, where he made few major missteps. Lawmakers from both parties agreed that prices are still rising too fast, putting pressure on Warsh to deliver on his commitment to 'price stability.'
Part of Warsh's challenge is that he wants to rethink how the Fed measures inflation itself. Two important price measures — the consumer and producer price indexes — showed unexpected declines this week. CPI fell by 0.4% in June, while PPI fell 0.3%.
'Any central bank would be happy to have the data going in the right direction,' Warsh said. 'My view is these are all imperfect measures of the state of underlying inflation.' Warsh has appointed a task force to help answer the question he's asking about the nature of inflation, but it won't deliver results for months.
