Dorothy

Warsh noted that the labor market looks “stable,” and said this was one reason that he saw prices as “more concerning.”

Why are Republicans getting sad about the economy? We suspect it is the looming midterms. The odds that Republicans keep control of both the House and the Senate are quite low, according to most opinion polls. And even though there’s still a couple of months until Election Day, early voting is starting very soon, and many voters have likely made up their minds about the condition of the country and which way they will vote. Democratic control of even one house of Congress will ensure endless investigations, impeachment campaigns, and no further progress on Trump’s economic agenda. So it’s not shocking that Republicans are getting worried about the economy.

All-in on AI Much of Warsh’s speech actually focused on the potential for artificial intelligence to strongly boost the economy. He has spoken previously about the possibility that AI could increase the economy’s efficiency, which would enable it to expand without creating inflationary pressures. That would, in turn, reduce pressure on the Fed to lift rates.

Trump has also renewed his efforts to remove Fed governor Lisa Cook, who was appointed by former President Joe Biden. Replacing Cook would enable Trump to appoint a majority of the seven-member board. Trump tried to fire her last year but was temporarily blocked by the Supreme Court.

Trump tried to fire Fed governor Lisa Cook last year on the first day of the conference, in an effort to gain a majority on the Fed’s board. Cook sued to keep her job and the Supreme Court ruled in June she could do so while the case played out in court.

Warsh noted that in the past year, 54% of goods and services tracked by the government have seen price increases of 3% or higher. While that is down from the pandemic peak, it is “well above” the 32% that saw such increases in the two decades before the pandemic.

He noted that inflation has been broad and not just a result of higher gas prices stemming from the Iran war. More than half the goods and services the government tracks have seen their prices rise 3% or more from a year ago, he said. That’s “well above” the roughly one-third that saw such increases in the two decades before the pandemic.

Inflation cooled in June and July after spiking in May from soaring gas prices, yet it remains above the central bank’s target. According to the Fed’s preferred measure, it was 3.7% in July.

Prices have been climbing significantly faster than the central bank would like — 3.7% in the 12 months ending in July, according to the Fed's preferred yardstick. That's down slightly from the 4.1% reading in May, but well above the Fed's 2% target.