Wash stated in his testimony, "FOMC members have zero tolerance for persistently high inflation, and we are collectively and firmly committed to restoring price stability." He emphasized that monetary policy is the top priority at present, "If we get the policy right — and we will — the inflation surge of the past five years will become history."

Written by: Zhang Yaqi, Wall Street View

Federal Reserve Chairman Wash reiterated his anti-inflation stance, showing a tough attitude towards persistently high prices, and promised to get monetary policy right.

In a written testimony submitted to the House Financial Services Committee on Tuesday, Wash stated, "Committee members have zero tolerance for persistently high inflation, and we are collectively and firmly committed to restoring price stability." He emphasized that monetary policy is the top priority at present, "If we get the policy right — and we will — the inflation surge of the past five years will become history."

This statement further strengthened the Federal Reserve's tightening signal and echoed recent warnings from several Fed officials — several decision-makers had previously indicated that further interest rate hikes may be needed to curb inflation. The testimony was released on the same day that the U.S. Labor Department published the June consumer inflation data, drawing keen market attention to the interconnection between the two.

Economic Outlook: Robust Labor Market, Uncertainty in AI Prospects

Wash holds a relatively optimistic view of the overall economy, describing the current labor market as "overall stable," with almost no signs of layoffs, and nominal wage growth being relatively steady.

On the AI boom, Wash was more cautious. He acknowledged that AI is driving significant growth in business investment, but it also brings new uncertainties to the economy. "We are not yet clear to what extent the economy can benefit from AI developments," Wash said:

"The new opportunities for the economy also present new challenges for policymakers, and the Federal Reserve is closely monitoring its impact on inflation and the labor market."

Interest Rate Decision: Four Times Holding Steady, Internal Divisions Emerge

The minutes from the Federal Reserve's monetary policy meeting held from June 16 to 17 show that as concerns regarding the labor market eased slightly, officials' focus on inflation significantly increased. This was the first meeting chaired by Wash since taking office, and the attending officials unanimously voted to keep the target range for the federal funds rate unchanged at 3.5% to 3.75%, marking the fourth consecutive pause in adjustments.

However, the latest interest rate projections released simultaneously with the decision show clear internal divisions. Nine officials expect at least one more 25 basis point rate hike this year, with six anticipating at least two hikes; nine other officials, however, expect rates to remain unchanged or shift towards cuts. It is noteworthy that Wash, who has consistently criticized the "forward guidance" approach, chose not to submit individual rate projections.

Anti-Inflation Commitment: Continuously Strengthened Since Taking Office

Since taking office in May this year, Wash has consistently made addressing inflation a core policy issue, repeatedly emphasizing that the primary goal of monetary policy is to combat inflation. This Congressional testimony once again reiterates this position, indicating that the Federal Reserve will not easily shift to easing before inflation reaches target levels, which directly impacts the prospects for the bond market and interest rate-sensitive assets.