Warsh: "Rate hike decision was made by the Fed... not driven by the market"

Warsh: "Rate hike decision was made by the Fed... not market-driven"

"Reliance on individual data is a dangerous obsession... trends are important"

Kevin Warsh, Chairman of the U.S. Federal Reserve (Fed), emphasized on the 16th (local time) that the decision to raise the benchmark interest rate was an independent decision, not one driven by market conditions.

Chairman Warsh made this statement at a press conference after the interest rate decision was announced, when a Fox Business reporter asked if the market had driven the rate hike, given that a 90% chance of a rate hike was reflected in the market that day.

Chairman Warsh stated, "Again, the Federal Reserve has enormous power, and these decisions are ours to make," adding, "However, the proper coordination of mutual understanding between financial markets and the Federal Reserve is a matter that requires balance, and I have long believed that this balance could be better achieved than it is now."

He continued, "Today's decision was based on an assessment of the situation, an analysis of employment trends, and a judgment of the health of the economy. Sometimes the market tries to anticipate our decisions. I also monitor market prices to see what signals the market is sending. But today's decision was ours."

He also stated that he does not rely solely on data when making interest rate decisions.

He said, "As you know, I am not someone who relies solely on data. Therefore, I will not react in any particular way based on the data that appears before us."

When asked if the market's high interest in the August Consumer Price Index (CPI) ahead of this meeting was appropriate, Chairman Warsh replied, "Market participants seem to have become accustomed to holding their breath and waiting for a single data point over the past decade. But that is not my perspective. I did not hold my breath and wait for any specific data, whether it was the retail sales figures released this morning or the CPI figures released last week."

He added, "Trends are important, and individual data points are noisy. Relying on individual data is a dangerous obsession."

In his opening remarks at the press conference that day, Chairman Warsh once again emphasized the principles of monetary policy.

He clarified, "In my Jackson Hole speech, I expressed my commitment to adhering to the principles of monetary policy, not just the interest rate decision itself. I laid out a criterion for action: that we must be confident that underlying inflation is moving towards our target at a clear and sufficient pace."