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Senate rejects resolution to halt the Iran war as gas prices upend midterms

Despite rising political anxiety over the Iran war, senators on Thursday narrowly rejected a war powers resolution seeking to halt President Trump’s military action, which has been largely blamed for the spike in gas prices and become a flashpoint in the midterm election.

The Senate tally, 49-50, coming days after Trump’s bombastic address to the United Nations in which he threatened to “annihilate” Iran, was likely the last chance for lawmakers to go on record about the war ahead of November. More Republicans are peeling way from the president as the war drags on, a rare slap back to Trump, as they campaign for control of Congress. The Senate outcome fell short, with four GOP senators joining most Democrats in favor of the resolution.

“They have been carrying water for this ridiculous and illegal war for months and months and months and not listening to their constituents,” said Sen. Tim Kaine (D-Va.), who pushed the war powers resolution forward.

About half of rural American voters believe the economy is worse off now than when Trump returned to office, according to a new survey from the Associated Press in partnership with KFF. The costs of groceries, gas and healthcare rank as top pain points for the rural voters.

“We’ve got to break the cycle,” said Sen. Thom Tillis (R-N.C.), who joined in voting yes.

Republican Sens. Susan Collins of Maine, Lisa Murkowski of Alaska and Rand Paul of Kentucky also voted for the resolution to end the war, as they have in many previous tallies, and Democratic Sen. John Fetterman voted against.

This was the 14th time the Senate has considered a war powers resolution since Trump launched the conflict Feb. 28.

War powers resolutions are largely political statements, without the full force of law, but stand among the sharper tools the House and Senate have to express disapproval of the White House, short of halting funds for Trump’s military actions. As resolutions, they do not go to the president’s desk for his signature.

As gas prices climb, Republicans start to question the war

Republicans in control of Congress have shied away from directly confronting Trump over the war, now stretching past the seven-month mark. But their unrest is surfacing as stubbornly high gas prices leave voters in a cash crunch back home.

Diesel costs, in particular, have almost doubled, topping $6 a gallon, according to AAA.

Just returning from a swing through Iowa, Kansas and Nebraska stumping for GOP candidates who are suddenly at risk in their elections, Sen. John Kennedy of Louisiana called on Trump to hold a prime-time address to the nation to explain the Iran war strategy and the end game.

“People are confused about the war and upset about the cost of living,” he said.

But he and others were not yet ready to vote against the war.

“My own view is that the focus right now needs to be on attacking the cost of living issues,” said Sen. Josh Hawley (R-Mo.), who opposes the war powers resolution and believes the president is acting within his authority to conduct the military action.

House Democratic Leader Hakeem Jeffries scoffed at the handful of Republicans now trying to distance themselves from what he called Trump’s failed economy. “Now all of a sudden they’re waking up,” he said.

Democrats keep pushing war powers votes in Congress

Earlier this month, the House for a third time approved a war powers resolution, this time with seven Republicans joining the Democrats, including two from battleground Iowa, Rep. Zach Nunn and Rep. Mariannette Miller Meeks, where affordability issues among rural voters are dominating the campaigns.

Senators, though, have rarely been able to confront Trump by passing a war powers resolution.

In June, the Senate approved a war powers resolution after four GOP senators joined Democrats, but Republicans abruptly reversed course the next day after Trump berated them during a private lunch over the outcome.

At the time, Sen. Bill Cassidy of Louisiana stood up to defend his vote only to end up in a shouting match with Trump. He later switched to oppose the war powers resolution after receiving a personal briefing from the White House.

Thursday’s vote was on a resolution that had passed the House in July with GOP support. Rep. Pramila Jayapal (D-Wash.) who authored the House resolution, said the Senate outcome was “a slap in the face to the millions of American people who want this war to end.”

Other options to halt the Iran war

As the war drags on, costing $43.5 billion so far, Congress is also seeking other ways to force Trump to rethink his military strategy in Iran.

Rep. Thomas Massie, the renegade Republican from Kentucky, pushed forward articles of impeachment against Secretary of Defense Pete Hegseth before the GOP leadership abruptly adjourned the House and sent lawmakers home to campaign for the election, avoiding any potential vote on the matter.

Lawmakers also have the power of the purse to curtail military spending, something Republicans have been reluctant to do but Democrats are sure to tackle if they win power in the midterm election. The White House’s request for an additional $87.6-billion funding package for the war and other needs has idled in Congress.

First created in the aftermath of the Vietnam War as a way to hold a president accountable for military actions, the war powers act has long posed a test of the balance of power between the executive and legislative branches of government.

While the Constitution says only Congress can declare war, the president as commander-in-chief is also able to engage the military. The war powers act seeks to provide clarity by requiring the president, within 60 days of any such action, to seek approval — or risk disapproval — from Congress.

Mascaro writes for the Associated Press. AP writers Joey Cappelletti and Mary Clare Jalonick contributed to this report.

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Newsom rejects roll back of CEQA exemptions for advanced manufacturing

Gov. Gavin Newsom on Friday vetoed legislation that would have narrowed exemptions to the California Environmental Quality Act for advanced manufacturing facilities amid pushback from business and industry groups.

Senate Bill 954 from state Sen. Catherine Blakespear (D-Encinitas) would have rolled back parts of last year’s controversial overhaul of CEQA, which fast-tracked approvals for a broad array of housing and infrastructure projects in an effort to ease new construction in the state.

Critics said the overhaul opened up a path for advanced manufacturing facilities such as strip miners, chemical producers, battery recyclers and semiconductor plants to open in communities without any environmental review. Dozens of environmental groups including the Sierra Club, the Natural Resources Defense Council and California Environmental Voters urged the governor to sign the legislation into law, arguing that it would have provided essential protections for communities that already experience the worst pollution from industrial facilities.

In his veto message, Newsom said last year’s CEQA reform was a “long overdue overhaul to get California building again.”

“While I appreciate the author’s stated intent to ensure these reforms do not result in unintended adverse impacts on the environment, this bill does not merely clarify or refine the existing exemption. It repeals the CEQA exemption for advanced manufacturing facilities,” the governor wrote. “Further, the bill’s numerous new siting, operational, and emissions requirements would make the narrower exemption impractical for many of the projects it was intended to support.”

In a statement, Blakespear said she was “disappointed” in the governor’s decision. While some of the new CEQA exemptions are important to stimulate construction, the recent near-miss chemical disaster in Garden Grove — which prompted thousands of evacuations in May —illustrates the danger that can come from siting advanced manufacturing facilities in communities, she said.

“We should not have to wait for another emergency before recognizing that sweeping — and rushed — exemptions from environmental review need reasonable guardrails,” Blakespear said. “Protecting communities and workers is not an impediment to economic growth; it is part of responsible growth. We need guardrails to these CEQA exemptions to safeguard Californians and ensure the environment isn’t damaged.”

Newsom’s veto came amid pushback from industry groups and prominent business organizations including the California Chamber of Commerce and the California Manufacturers & Technology Assn. The California Department of Finance also was opposed to the bill, which it described in an analysis as “inconsistent with Administration policy.”

Lance Hastings, chief executive of the California Manufacturers & Technology Assn., said in a statement Friday that the governor’s veto protects “the ability of manufacturers to innovate and create here in California.”

Manufacturing generates $382 billion a year for California and supports 1.24 million jobs, he said.

But opponents said Newsom’s decision will ultimately endanger communities and leave more people exposed to industrial hazards.

“Frontline communities across California continue to face consequences from polluting industries that have damaged our air, and water for the sake of corporate profit,” said Asha Sharma, deputy director at the nonprofit Sierra Club California. “SB 954 was developed to ensure those same mistakes do not continue.”

Blakespear said she will continue working on the issue next year.

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Egypt’s el-Sisi rejects displacement of Palestinians from Gaza | News

Israel’s defence minister has pledged to remove Palestinians from the besieged Strip.

Egyptian President Abdel Fattah el-Sisi has rejected any plans for Palestinian displacement, following comments by Israel’s defence minister saying the army would “finish the job” in Gaza.

Speaking during a visit by Palestinian President Mahmoud Abbas on Wednesday, el-Sisi stressed “Egypt’s firm stance against the displacement of the Palestinian people or any attempt to annihilate the Palestinian cause”, the Wafa news agency reported.

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Abbas praised Egypt’s steadfastness in defending Palestinian rights and reiterated that “Gaza is an integral part of our state.”

The Egyptian leader’s comments came hours after Israeli Defence Minister Israel Katz said the army would “finish the job” in Gaza, “so that we can also implement the migration plan.”

Katz said earlier this month that Israel was ready to remove Palestinians from Gaza by sea and land, but was waiting for the United States, which he said was discussing where the two million people would go.

US Ambassador Mike Huckabee has denied any plan to “displace people out of Gaza against their will”. In February, Huckabee explicitly said he “would be fine” if Israel took most of the Middle East in accordance with his interpretation of the Bible, but then suggested the remark was selectively edited.

Nearly all of Gaza’s population has been internally displaced, and most of the territory lies in rubble after three years of a war that has killed more than 73,700 Palestinians.

Israeli Prime Minister Benjamin Netanyahu said earlier this month that the army would not withdraw from the Gaza Strip, despite a US-backed ceasefire plan that came into effect in October stipulating it as a condition.

Netanyahu claimed Israel controls 60 percent of the Palestinian enclave and promised not to pull back until Hezbollah is disarmed.

His government has been pushing for more Israeli settlements on Palestinian territory in the West Bank, including through a controversial settlement project dubbed E1 designed to construct thousands of housing units between Jerusalem and the Maale Adumim settlement.

Israeli human rights group B’Tselem warned this week that Israel is executing a systematic and accelerated campaign to dismantle “Palestinian collective life” and establish permanent Jewish-Israeli sovereignty across the occupied West Bank.

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US Supreme Court rejects Trump’s plans on postal ballots: Why it matters | Courts News

The United States Supreme Court has rejected Donald Trump’s bid to restrict voting by mail ahead of the November midterm elections, in a setback to the US president’s efforts to change rules governing elections.

The ruling on Monday by the conservative supermajority court allows states to continue sending out mail ballots as they have done for years, dealing a blow to Trump’s plans to stop the ballots before the elections and halting possible last-minute legal actions as voting begins in some states.

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Trump has repeatedly cast doubt on the security of mail-in voting, citing debunked claims of widespread election fraud associated with it. That is despite the president voting by mail himself, including during the 2024 election.

Mail ballots, in place for decades, have been found to increase voter turnout and currently account for a third of all votes cast in the US.

Here’s what we know about the legal challenge to overturn them:

President Trump speaks at the Republican National Midterm Convention in Dallas, Texas, US, September 9, 2026
President Trump speaks at the Republican National Midterm Convention in Dallas, Texas, US, September 9, 2026 [Evan Vucci/Reuters]

What are mail-in votes?

Voting by post works by sending ballots to the homes of registered voters, who then mail them back before a deadline.

Eight states, several of them Democratic-leaning – California, Colorado, Hawaii, Nevada, Oregon, Utah, Vermont and Washington – as well as the District of Columbia, allow all elections to be conducted entirely by mail.

Others only allow smaller elections to be conducted by mail.

Although there are cases of forgery or repeat voting, they are rare and amount to just four in 10 million mailed votes, according to the Brookings Institution.

What has Trump said about the mail-in votes?

Trump falsely blamed his 2020 presidential election loss on mail-in voting fraud. He and his supporters also opposed changes made during the COVID pandemic to expand mail-in voting.

During the 2020 Republican National Convention, Trump called mail-in voting changes “the greatest scam in the history of politics”.

His attempt to push the SAVE America Act, which calls for sweeping voting laws, has stalled in the US Senate. The bill, passed in the House of Representatives in February, faces opposition over concerns that millions of voters will be disenfranchised.

How did Trump target mail-in votes?

In March 2026, Trump signed an executive order directing the US Postal Service to take control of mail voting by designing new envelopes with special barcodes that would allow the federal government to ensure ballots are only from eligible voters.

For the midterms, that move would force all states to adopt a uniform envelope style in a short time.

The order also required states to provide the US Postal Service with a list of eligible voters ahead of elections. Several government departments, including Homeland Security and US Citizenship and Immigration Services, would also have the voters’ lists.

The postal agency was additionally empowered to deny mailed ballots if they did not comply with new standards or were not associated with registered voters on the states’ lists.

What happened to the order?

Democrats and activists challenged the order in several courts, resulting in a series of back-and-forth rulings between May and August.

US District Judge Indira Talwani imposed an injunction against the rule in June on the basis that it likely violated the US Constitution. Talwani also noted in her injunction that Trump’s executive order would be impossible to apply when the midterms were already so close.

But her ruling was overturned by the conservative-majority Supreme Court in late August in a temporary judgement.

The Supreme Court had not decided at the time whether Trump’s move was constitutionally legal. Rather, it only sided with the Trump administration on procedural grounds after the administration argued that Democrats sued too soon.

What does the latest judgement mean?

In the latest and final decision, the Supreme Court refused to lift Judge Talwani’s injunction.

In a brief written order that did not go into detail, the court noted that the administration was likely to fail in its push to restrict mail-in votes ahead of the midterms.

Justice Brett Kavanaugh, who was appointed by Trump, voted with the majority against the administration, though he indicated he could support the policy at a later stage. Two judges, Samuel Alito and Clarence Thomas, dissented.

Critics have long warned that restricting mail-in ballots could disenfranchise some voters who typically rely on this method.

It could also disrupt the delivery of mailed votes, as some states, including Alabama, North Carolina and Wisconsin, have begun sending in midterm ballots.

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China rejects AI ‘threat narratives’, urges global cooperation | Science and Technology

China called for international cooperation on artificial intelligence, warning that “threat narratives” could disrupt global AI governance. The comments follow Anthropic CEO Dario Amodei’s call for AI firms to slow model development over safety and national security concerns.

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Arab News | MSF rejects Israeli claims it willingly employed staff with terrorist ties in Gaza

DUBAI: Medecins Sans Frontieres has rejected claims by Israeli authorities that it employed individuals with links to Hamas in Gaza, saying the allegations were only brought to the organization after the accused were killed.

“Medecins Sans Frontieres unequivocally refutes the allegations made by the Israeli authorities that we knowingly hired people with ‘ties to terrorism,’” MSF told Arab News in a statement.

“MSF would never knowingly employ anyone involved in military activities, which contradicts our core values and ethics. The MSF staff members whom Israel has alleged to have ‘ties to terrorism’ were only reported as such to our organization after they had been killed.”

On Friday, British newspaper The Telegraph revealed that Israeli lobby group UK Lawyers for Israel had written to British Home Secretary Shabana Mahmood, urging that the humanitarian organization be banned for its links to terrorism.

A report, produced by UKLFI, alleged links between MSF employees and militant groups, including Fadi Jihad Mohammed Al-Wadiya, an accused Palestinian Islamic Jihad member who was killed in Gaza City last year.

Al-Wadiya, a physiotherapist employed by MSF from 2018 to 2022 and again from Oct. 7, 2023, was killed in an Israeli airstrike in Gaza City on June 25, 2024. MSF condemned the strike at the time.

MSF initially rejected claims linking Al-Wadiya to the group. However, on Feb. 24 this year, Palestinian Islamic Jihad published a poster naming him as a “martyr commander” and identifying him as deputy head of its military manufacturing unit.

The charity later updated its post about Al-Wadiya, who remained listed as an employee on its website, to note that Palestinian Islamic Jihad had publicly stated on Feb. 24, 2026, that he had been a member of the group.

The report also accused Nasser Hamdi Abdelatif Al-Shalfouh, an MSF driver, of being a sniper for the Hamas Jabaliya battalion.

MSF questioned the reliability as well as the intention of Israeli authorities, who failed to consult with the organization prior to killing the supposed members.

“If Israeli authorities had reliable information about any MSF staff involvement in military activity, they never shared it with us before their deaths.”

The organization told Arab News that the latest allegations were part of a broader disinformation and smear campaign seeking to discredit it.

“For months, MSF has been the target of a disinformation campaign, and we strongly condemn the intentional spread of false allegations.”

Founded in 1971, MSF, also known as Doctors Without Borders, is an international medical humanitarian organization that provides emergency healthcare in conflict zones, disease outbreaks and other crises.

In Gaza, MSF’s teams provide surgical care, wound and burn treatment, maternal and pediatric services, physiotherapy, vaccinations, mental health support, water and sanitation assistance, and treatment for chronic diseases through hospitals, field hospitals and clinics.

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US court rejects Trump’s emergency order keeping Michigan coal plant open | Environment News

The ruling says the Energy Department exceeded its authority by extending the plant’s operation.

A federal appeals court has ruled that the United States Energy Department exceeded its authority when it ordered a coal-fired power plant in the US state of Michigan to remain open beyond its planned retirement, dealing a setback to the Trump administration’s effort to keep ageing coal facilities operating.

The US Court of Appeals for the District of Columbia Circuit ruled unanimously on Friday that there was no emergency under federal law that justified keeping the 64-year-old JH Campbell Generating Plant online. Energy Secretary Chris Wright invoked emergency powers last year, arguing that the plant was needed to maintain reliable electricity in the region.

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President Donald Trump declared a national energy emergency in an executive order in January last year, citing demand increases from artificial intelligence and data centre growth.

Judge Cornelia Pillard, writing for the three-judge panel, said the emergency provision of the Federal Power Act was intended as a “narrow, last-resort backstop.” She said the authority could be used only when immediate action was required, and states or utilities could not address the problem themselves.

Pillard also described the reversal of the plant’s “long and carefully planned retirement” as “disruptive”.

The plant, operated by Consumers Energy, had been scheduled to close in May 2025, but the company has continued operations under energy department orders. That has cost about $259m, according to financial filings, with opponents warning that the expense could ultimately fall on families and businesses in midwestern US states.

The company told The Associated Press it was reviewing the court ruling.

Michigan Attorney General Dana Nessel, a Democrat, whose office joined counterparts in Illinois and Minnesota in challenging the orders, welcomed the ruling. She said the appeals court had “thrown out DOE’s order that had zero basis in reality”.

The Energy Department defended its use of emergency powers, saying the orders helped prevent blackouts and “likely saved hundreds of lives” during periods of peak demand, particularly during severe winter storms in late January and early February.

The department said that during the winter storm peak, coal generation in affected areas increased by 25 percent compared to the previous year.

The Michigan case is one of several legal disputes that have emerged across the country. Secretary Wright issued another emergency order, just hours after the ruling, to a coal plant in Centralia, Washington, to remain in operation. Similar orders have been issued for plants in Indiana, Colorado and Florida, as well as an oil and gas plant in Pennsylvania.

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Arab News | Israel army rejects testimonies in film about AI-powered killing in Gaza

JERUSALEM: The Israeli military on Friday said it “categorically rejects” allegations made in a new documentary about Israel’s AI-powered mass killing of civilians in Gaza, which received a 25-minute ovation at its premiere in Venice the day before.

The Israeli-made film “NAZA” uses conversations with 24 different Israeli military or intelligence whistleblowers who spoke on condition that their identities be protected, with interviewees describing how they felt like they worked in a killing “factory” or a lethal video game.

The Israeli military criticized the use of anonymous testimonies in the film which it said “cannot be verified”, saying in a statement that it “makes unprecedented efforts to minimize harm to civilians” during its offensive in Gaza.



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Arab News | UN-backed ‘Quintet’ bloc rejects idea of parallel Rapid Support Forces rule in Sudan

NEW YORK CITY: A five-member international bloc known as the “Quintet” on Thursday rejected the prospect of any “parallel governing structures” in Sudan.

As its representatives wrapped up a “Good Offices” mission to Khartoum, they reaffirmed the need for full respect for the country’s sovereignty, unity and territorial integrity.

The rebuke, a reference to a rival administration the paramilitary Rapid Support Forces seeks to establish amid its conflict with the Sudanese Armed Forces, came after the Quintet — the African Union, the Intergovernmental Authority on Development, the Arab League, the EU and the UN — held talks with Sudanese leaders in an effort to revive a Sudanese-led political process to end the civil war, which began in April 2023.

The delegates met the chair and deputy chair of Sudan’s Transitional Sovereignty Council, the prime minister, and the undersecretary of the Ministry of Foreign Affairs and International Cooperation. They also attended a working dinner hosted by the finance minister that drew a number of political and civilian figures.

Beyond government officials, the Quintet said its representatives met a range of political and civilian groups, including the Democratic Bloc, and heard from a committee tasked with fostering the conditions for a nationwide “Sudanese Dialogue,” which briefed the delegates on its work. A meeting with independent women’s and youth groups concluded the Quintet’s mission.

The bloc described the visit as being “in the spirit of listening to the stakeholders on the ground,” with the aim of linking its diplomatic engagement outside of Sudan with initiatives emerging within the country.

“There is no military solution to the conflict in Sudan,” the Quintet said, adding that any durable political process must be paired with concrete steps to protect civilians and end hostilities.

The bloc said it remained convinced that a “credible and inclusive Sudanese led and Sudanese owned” political track can still deliver a transition to a democratic, civilian-led government that reflects the aspirations of the Sudanese people.



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North Korea rejects U.S. ‘hostile’ policy, vows to bolster nukes

North Korea on Monday condemned the “hostile policy” of the United States and vowed to continue bolstering its nuclear arsenal. In this October 2025 photo, leader Kim Jong Un attends a military parade in Pyongyang. File Photo by KCNA/EPA

SEOUL, Aug. 31 (UPI) — North Korea on Monday condemned what it called the United States’ continued “hostile policy” and vowed to keep bolstering its nuclear arsenal despite U.S. President Donald Trump’s recent overtures to Pyongyang.

In a statement carried by the official Korean Central News Agency, a spokesperson for the Foreign Ministry accused Washington of maintaining a confrontational stance toward North Korea in both “rhetoric and behavior.”

“The Trump administration has thus fully reconfirmed its invariable hostile policy to wantonly violate the sovereignty, political system and security interests of the DPRK through the ‘denuclearization’ racket, ‘human rights’ smear campaign and military threat,” the statement said, using the official acronym for North Korea.

“It is pointless to expect any detente in the region,” it added.

The statement comes amid a push from Trump to restart direct diplomacy with North Korean leader Kim Jong Un, with whom the U.S. president has touted a “very good relationship.”

Earlier this month, Trump ordered Seoul and Washington to curtail their joint Ulchi Freedom Shield military exercise, citing its cost and saying the drills sent an “inappropriate and hostile” signal to Pyongyang. The exercise was subsequently shortened by almost a week.

Despite the move, the U.S. State Department last week reaffirmed its commitment to the “complete denuclearization” of North Korea in a statement to Yonhap News Agency.

The United States, South Korea and Japan also confirmed last week that their annual Freedom Edge trilateral military exercise will be held Sept. 7-11 in international waters east and south of South Korea’s Jeju Island.

The Foreign Ministry spokesperson called the multi-domain exercise a “threat to the DPRK and regional countries.”

North Korea routinely denounces joint military drills as rehearsals for an invasion and has carried out weapons tests around major allied exercises.

The spokesperson said North Korea’s nuclear status, which has been enshrined in its constitution, could not be “weakened nor diluted” by repeated U.S. calls for denuclearization.

“Our nukes serve as an absolute guarantee for defending its sovereignty and the nuclear weapons in possession of the DPRK and their sustained bolstering are the most responsible and correct option for ensuring regional peace and security,” the statement said.

“There is no change in our policy toward the U.S. to respond to its invariable hostile policy with the toughest stand to the last,” it added.

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Warsh flags inflation concerns as he rejects Fed forward guidance

Marking his 100th day in the job, Federal Reserve Chair Kevin Warsh told the Kansas City Fed’s symposium in Wyoming that the US economy has strengthened rather than weakened under recent shocks, that the labour market is consistent with full employment, and that inflation remains the central bank’s dominant concern.


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Warsh declined to say what he would do next month, but he removed most of the arguments against acting and bolstered the ones in favour of a rate hike.

“For my part, today I am impressed by the overall performance of the economy, which appears to have strengthened,” Warsh stated.

“One indicator of strength is how well an economy holds up to shocks. On that score, both Main Street and Wall Street have been remarkably resilient,” he added.

On inflation, Warsh noted that the PCE index stood at 3.7% over twelve months and 4.1% over six, and 54% of the basket’s components rose by more than 3% over the past year, against 32% in the two decades before the pandemic.

Summer readings that beat expectations “do not tell me that underlying trends have meaningfully improved,” Warsh stated.

The Federal Reserve Chair’s conclusion was blunt: “the Fed’s predominant focus right now should be on prices.”

The standard set was equally direct. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” Warsh declared.

That assessment matters because it eliminates the case for supporting growth with further stimulus and potentially opens the door for restrictive measures as markets moved in response.

At the time of writing, the 10-year Treasury yield has fallen 0.5% from its Friday high to 4.67% and the 30-year dropped around 0.9% to 5.16%, while the dollar index rose 0.4% from the intraday low to roughly 99.4 points.

Traders raised the implied probability of a 0.25% hike at the 15 and 16 September Fed meeting to 55%, from around 35% before Warsh’s speech.

Performance of the US economy

Warsh opened his speech with what he called a hinge point in history, arguing that artificial intelligence has advanced faster than even its advocates predicted.

Annualised AI token sales at the two leading labs alone exceed $100 billion, he said, up more than 500% in a year.

AI is “a new variable, potentially a new factor of production,” raising questions the Fed cannot answer yet such as whether it will lift productivity and when, whether it complements or replaces labour, and where the returns will ultimately land.

A new Federal Reserve task force on productivity and jobs is examining it, though he stressed its recommendations will have no bearing on current policy decisions.

Warsh then listed extensive evidence for his positive outlook on the US economy.

Business investment in equipment and intangibles growing at around 9%, its fastest since 2021, with more than half of this year’s capital expenditure growth attributable to the AI buildout.

S&P 500 profits went up more than 20% over the year, credit spreads are near historic lows and banks are easing lending standards. Housing and agriculture are strained, Warsh acknowledged, but on balance he “would be hard pressed to describe broad financial conditions as restrictive.”

Unemployment at 4.1% is low by historical standards, with jobless claims near their lowest in decades, leaving inflation as the outlier.

No forward guidance

The Federal Reserve Chair devoted a substantial section to defending his refusal to signal future moves, a stance that has drawn criticism since he took office in May.

Forward guidance was adopted during the 2008 crisis by colleagues including himself, he said, and was essential then, but “the practice has overstayed its welcome” and now “risks creating ambiguity in the name of clarity.”

Warsh warned of a hall-of-mirrors problem in which markets read the Fed while the Fed reads markets, leaving both blind to new developments.

“We should not indulge a regime in which market participants are looking primarily to the Fed for their next trade,” he said, adding that the costs of such errors fall not on “financial high-fliers” but on households facing high inflation or insecure jobs.

Warsh also rejected calls to publish an explicit reaction function, arguing economic knowledge does not permit a mechanical rule.

Instead he set out six principles: interrogate incoming data rather than trust stale figures, accept that judging supply against demand is imprecise; treat the 2% PCE target as firm and fixed; pursue both mandates without treating them as a trade-off; rely on short-term rates rather than unconventional tools; and remember that money itself matters.

“I stand here today committed to a discipline, not to a decision,” Warsh said in closing.

The decision comes on 16 September at the next Fed meeting.

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