New Federal Reserve Chair Kevin Warsh faces significant pressure as he prepares to deliver his first major speech at the Fed’s annual conference in Jackson, Wyoming, The New York Times reports.  Drawing on advice from former Fed Chair Paul Volcker, Warsh must both set interest rates appropriately and demonstrate that the central bank understands what it is doing. Warsh has clearly emphasized his commitment to bringing inflation back to the Fed’s 2% target, but he has avoided giving specific guidance about whether interest rates should rise, creating uncertainty among policymakers and financial markets.  His speech is expected to explain how he views the economy and major structural changes, including artificial intelligence and its potential to increase productivity and economic growth. However, increased AI investment and borrowing could also create greater competition for capital and contribute to higher interest rates.  At the same time, rising long-term borrowing costs, heavy government borrowing, the ongoing Iran war and renewed trade tensions are creating additional economic and inflation risks.  Within the Fed, officials are divided over whether current interest rates of 3.5% to 3.75% are sufficiently restrictive. Some favor gradually raising rates to prevent inflation from becoming entrenched, while others believe inflation will decline later this year and prefer to wait. Ultimately, Warsh must determine whether inflation can fall without additional action from the Fed. His credibility will depend not only on making the right policy decisions but also on clearly explaining how he views the economy, inflation and the risks facing the central bank. The New York Times has the full story. A subscription may be required. ...read more read less