Federal Reserve Chairman Kevin Warsh named housing as one of the few corners of the U.S. economy showing real damage from high interest rates, then made clear that fixing inflation — not relieving those sectors — is what will drive policy for now.
Speaking Friday morning at the Federal Reserve Bank of Kansas City’s economic policy symposium in Jackson Hole, Wyo., Warsh delivered an address titled “In Our Time”, his first keynote at the symposium since becoming chairman. He used it to bury the Fed’s practice of forward guidance, lay out six principles for policy and deliver a blunt assessment of where inflation stands.
“Certain sectors — like housing and agriculture — are showing strains,” Warsh said. “But, on balance, I would be hard pressed to describe broad financial conditions as restrictive.”
That sentence is the one that matters most for anyone financing a home or a building. A central bank that does not believe its policy is restrictive is not a central bank preparing to ease.
Why Warsh says inflation still comes first
Warsh’s read on prices was the least comfortable part of the speech. The 12-month change in the personal consumption expenditures price index — the Fed’s preferred inflation gauge — stands at 3.7%, he said, while the six-month change is running at 4.1%. Both are well above the Fed’s 2% objective.
He went further, disaggregating the 199 individual components of the PCE basket. Over the past 12 months, 54% of the goods and services in that basket posted price increases above 3%. That is down from post-pandemic highs near 77%, but far above the 32% that prevailed in the two decades before the pandemic. Over the past six months, 49% of components ran above 3% on an annualized basis.
“Each of these broad inflation measures has fallen significantly from their 2022 heights,” Warsh said. “But progress over the past two years has been modest.” Summer’s better-than-expected PCE and CPI readings, he added, “do not tell me that underlying trends have meaningfully improved.”
His accountability line was sharper still: “The responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank. And that is where it belongs.”
The employment side of the mandate, by contrast, drew no alarm. The jobless rate at 4.1% “remains low by historical standards,” Warsh said, four-week average unemployment claims are near their lowest level in decades, and he judged labor markets “consistent with full employment.” With both stable jobs and above-target inflation, he said, “the Fed’s predominant focus right now should be on prices.”
The end of forward guidance
The structural news in the speech was Warsh’s decision to scale back the Fed’s practice of signaling its future rate path — a practice adopted during the 2008 financial crisis, when Warsh himself was a Fed governor.
“Transparency in communications about future policy decisions is not a virtue unto itself,” he said. “Oversharing policy deliberations and overcommitting to future decisions can lead markets, businesses, and households astray.”
He argued that publishing an explicit reaction function or rate path “works better in theory than in practice, better in the lab than in the field,” and pointed to 2021 guidance as an example that “might well have slowed the policy response to high inflation.” He also warned of a “hall-of-mirrors problem,” in which markets lean on Fed guidance while the Fed reads market prices, leaving both blind to new developments.
Warsh framed his six governing principles around contemporaneous data, humility about the unobservable supply side, a “firm, fixed” 2% PCE target, a dual mandate that in his view does not work “at cross-purposes,” short-term rates as “the predominant tool,” and a revived attention to money itself. He closed on his standard for easing: “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.”
Where that leaves mortgage rates
Borrowing costs entered the speech already elevated. Freddie Mac’s Primary Mortgage Market Survey put the 30-year fixed-rate mortgage at 6.66% on Aug. 27, up from 6.65% a week earlier and above the 6.56% of a year ago, with the 15-year fixed at 5.98%. Freddie Mac said rates “changed little this week.”
The Federal Open Market Committee has held its benchmark rate at 3.5% to 3.75% since late 2025, most recently in a rare 9-3 vote in July in which three officials pushed for a hike rather than a cut. The committee next meets Sept. 15-16, a session that carries an updated Summary of Economic Projections, according to the Fed’s published calendar.
Warsh also devoted the opening of his speech to artificial intelligence, a subject with direct consequences for commercial real estate. Business investment in equipment and intangibles has grown about 9% over four quarters, its fastest since 2021, and “more than half of the cap-ex growth this year can likely be ascribed to the buildout related to AI,” he said — the capital wave behind the data center pipeline. He noted annualized token sales at the two leading AI labs alone now exceed $100 billion, up more than 500% from a year ago.
What it means
Verified: inflation is running at 3.7% on a 12-month basis, the jobless rate is 4.1%, the policy rate has not moved since 2025, and the 30-year mortgage average is 6.66%.
Attributed to Warsh: that financial conditions overall are not restrictive, that housing is nonetheless strained, and that the Fed’s focus belongs on prices until underlying inflation moves toward 2% “clearly and at sufficient speed.”
RealtyWire analysis: two things follow for housing and commercial property. First, the near-term case for materially lower mortgage rates rests on the inflation data improving, not on the Fed responding to housing weakness — Warsh explicitly acknowledged the strain and declined to treat it as a reason to ease. Second, retiring forward guidance removes a shock absorber. When the Fed stops pre-committing, more of the adjustment happens in the bond market after each data release, and the 10-year Treasury yield that sets mortgage pricing is likely to move in larger increments around CPI, PCE and jobs reports than it did under the guidance regime. Borrowers and lenders should plan for a choppier rate path, not necessarily a higher or lower one.
What to watch: the September FOMC meeting and its projections; the next PCE and CPI prints, which by Warsh’s own standard are the gating factor for any policy shift; and whether the share of PCE components running above 3% keeps falling from 54%. Warsh’s own framing of his job was deliberately open-ended. “I stand here today committed to a discipline, not to a decision,” he said. Our earlier coverage examined the theory that Warsh could pair short-rate discipline with balance-sheet policy that pulls long-term yields down; nothing in Friday’s speech advanced that idea, which addressed the balance sheet not at all. For context on how borrowing costs got here, see our report on the 30-year rate reaching 6.66%.
