Federal Reserve Releases First Monetary Policy Report Under Chairman Kevin Warsh

The Federal Reserve released its semi-annual monetary policy report to Congress, the first presented under Chairman Kevin Warsh, who took office in late May 2026 after Jerome Powell's term ended. The document outlines U.S. inflation accelerating in spring 2026 from higher tariffs, rising energy costs tied to geopolitical tensions and heavy spending on artificial intelligence infrastructure.

The Personal Consumption Expenditures Price Index stood at roughly twice the Fed's 2% target as of May. The central bank has kept benchmark interest rates unchanged since December 2025. Projections from the June 16-17 Federal Open Market Committee meeting showed officials divided between favoring further rate increases and expecting rates to hold steady or fall.

Economic growth reached a 2.1% annualized pace in the first months of 2026, lifted by AI-related investment but held back by a stagnant housing market and modest household spending gains. The unemployment rate was 4.2% in June, with job openings largely steady and layoffs remaining subdued. Labor force growth slowed sharply because of weaker immigration and an aging population.

The report noted that growth in the broad M2 money supply measure has returned to levels typical of the 2010s after the large pandemic-era increase in money balances was largely reversed. Warsh is scheduled to testify before congressional committees next week as part of the Fed's twice-yearly monetary policy hearings.