“If people thought this central bank was going to be comfortable with an inflation objective above 2%, they would be disappointed,” Warsh told a European Central Bank panel in Sintra, Portugal, adding, “We have been an independent central bank for a long time. We are going to be an independent central bank at this moment and you will see no changes on that.”
He however noted that inflation risks had eased recently but restated that he would give little hints on monetary policy projections.
Warsh also promised to bring in real-time economic data that will help the US central bank make better policies, replacing what he termed problematic government reports.
“My aspiration is that nine to 12 months from now we’re going to be using new technologies to understand what’s happening in the real economy in a contemporaneous, real-time way that positions us as central bankers to make better decisions, that we’re no longer going to have to rely solely on data that we get from government agencies with mismeasurement problems that have surveys that are no longer relevant,” he said. “My favorite data is upon us, and if we do our jobs, we’ll be here a year from now, and we’ll say we’ve discovered data that helps us make better decisions.”
The Federal Reserve relies on a broad mix of government, private-sector and internal data — both public and non-public — to assess economic conditions and guide interest rate decisions aimed at supporting employment and keeping inflation under control.
Warsh has argued that the Fed places excessive reliance on official data, which he believes often lags or fails to accurately reflect current economic conditions. He contends that flawed data has contributed to poor policymaking, allowing inflation to remain above the central bank’s target for more than five years.Fed officials, however, say they guard against the risk of relying on data that may later be revised or fail to capture current conditions by focusing on longer-term trends — an approach Warsh himself appeared to endorse on Wednesday when he avoided drawing monetary policy conclusions from recent economic data.
They also argue that regular consultations with business leaders and organisations across the country, summarised in the Fed’s Beige Book, provide timely insights into economic developments that may not yet be reflected in official data.
Task Force members to be named soon
Warsh also said he would start naming members of his five new task forces from next week, one of which focuses on finding new data-gathering sources and methods.
Warsh says his task force may have ideas about how to improve official data but also about how to generate more up-to-date information about the economy.
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