Federal Reserve Chairman Kevin Warsh is set to deliver his first congressional testimony since taking over as head of the U.S. central bank. Warsh’s public comments and Senate confirmation hearing have highlighted many of his views, but some important questions remain around his thoughts on the state of the economy, inflation, and labor markets.

Employment and Inflation

Lawmakers may explore Warsh’s views on the expected size of the labor force and how it might impact the Fed’s mandate to achieve maximum employment. Additionally, they may question Warsh on his thoughts regarding the Fed’s 2% inflation target and how he plans to rely on the money supply to achieve price stability.

Warsh has indicated that he is comfortable with inflation being slightly above the 2% target, but it is unclear how he will respond to inflation that falls below 2%. The Fed has a symmetric view of its target, with outcomes that are too low regarded as just as worrisome as outcomes that are too high.

Expectations and Monetary Policy

Fed policymakers regard public expectations about inflation as central to how inflation evolves. Warsh has not spoken about expectations with the same urgency as his colleagues, and it is unclear whether he agrees that keeping expectations anchored is a top priority for the Fed.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.