A MARTÍNEZ, HOST:
Interest rates are holding steady for now. NPR's Scott Horsley reports on what the Federal Reserve's next move might be.
SCOTT HORSLEY, BYLINE: There's a new chairman at the Federal Reserve. Kevin Warsh spoke to reporters yesterday for the first time since taking over at the central bank.
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KEVIN WARSH: It's an honor, a true honor to be back at the Federal Reserve and to take up this duty at a time of such consequence.
HORSLEY: President Trump chose Warsh for the job in hopes he would slash interest rates. But with a wartime spike in energy prices, pushing inflation above 4%, rate cuts seem unlikely anytime soon. In fact, Fed policymakers signaled their next move is likely to be a rate increase. Financial markets didn't much like that message. The Dow Jones Industrial Average fell more than 500 points yesterday. But Warsh insists he and his Fed colleagues are determined to bring stubborn inflation under control.
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WARSH: The commitment to deliver is strong, unanimous and unambiguous. And that's, I think, an important message we've missed for five years, and we're going to fix that.
HORSLEY: That may be easier said than done. The Fed fights inflation by raising interest rates, which tempers demand, but it does little to address a supply shock, like the one caused by the war with Iran, which has snarled oil tanker traffic on the Strait of Hormuz. A tentative ceasefire in the war may provide some relief, but energy analysts say it could take months to repair the physical and economic damage and bring prices back to pre-war levels.
In the early weeks of the war, Fed policymakers still thought they'd be able to lower interest rates by a quarter percentage point this year, but updated forecasts released yesterday point to a quarter-point increase instead. Warsh himself did not offer a rate forecast. He's generally said the Fed should provide less forward guidance to avoid tying its hands in case conditions change. The new chairman's called for other reforms at the central bank. He's appointing a series of task forces to review how the Fed communicates with the public, how it tracks inflation and other economic indicators and how it responds to innovations that could upend the economy, like artificial intelligence.
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WARSH: Each task force will serve an objective shared by everyone in the system, a Federal Reserve that is clear-eyed about its mission, fit for purpose and focused on the future.
HORSLEY: Warsh says the task forces will draw on experts from both inside and outside the central bank. He expects them to make recommendations by the end of the year.
Scott Horsley, NPR News, Washington.
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