Fed Chair Warsh Faces Debt Hurdle on Inflation Goal

Federal Reserve Chairman Kevin Warsh is attempting to fundamentally rethink the central bank's approach to guiding the economy while using its standard policy toolkit to bring down inflation.

A market blowup late last month showed the perils of this approach. Warsh has promised a 2% inflation target, but skyrocketing U.S. debt makes this goal a pipe dream, according to one report. The nation needs inflation, not just economic growth, to escape its current debt crisis. The Federal Reserve is scouring fresh inflation data for interest-rate cues as mid-term elections loom.

Warsh's approach involves a high-wire act, balancing a new economic guidance strategy with existing policy tools to combat persistent inflation. The Federal Reserve chairman's efforts to reshape the central bank's economic guidance methods are ongoing.