Fed Chair Warsh Says Inflation Can Be Beaten Without Crashing the Labor Market

Fed Chair Kevin Warsh says the Federal Reserve does not need to severely weaken the labor market in order to bring inflation under control.
“I don't believe that we need to do harm to the labor markets to achieve our objective,” Warsh said.
The comment suggests the Fed believes it can continue fighting inflation without deliberately engineering a sharp rise in unemployment.
That would mark an important distinction for markets, especially as investors debate how much economic pain may be required to return inflation to target.
A stronger labor market alongside falling inflation would give the Fed more flexibility than a scenario where price stability can only be restored through a recession or major employment losses.
For markets, the key question is whether inflation can continue cooling without forcing the Fed into a choice between price stability and labor-market weakness.