Follow live updates on Kevin Warsh’s testimony to Congress on inflation.

Kevin M. Warsh reiterated his commitment to bringing down inflation at his first congressional hearing since becoming chairman of the Federal Reserve. However, he has yet to indicate whether he supports higher interest rates to achieve that goal.

Mr. Warsh on Tuesday told lawmakers on the House Financial Services Committee that the central bank will set policy “right” such that “the inflation surge of the last five years will be a thing of the past.”

A pledge to deliver price stability was established last month at Mr. Warsh’s first policy meeting in the top job, at which officials voted unanimously to hold rates steady at a range of 3.5 percent to 3.75 percent.

“The members of our committee have no tolerance for persistently elevated inflation,” Mr. Warsh told lawmakers at Tuesday’s hearing. “And we share a resolute commitment to restoring price stability.”

Mr. Warsh’s first of two days of testimony this week coincided with the release of the latest measure of inflation, the Consumer Price Index report. Inflation in June cooled sharply as falling energy prices stemming from a temporary truce in the war with Iran dragged down the overall index. “Core” inflation, which strips out volatile food and energy items to give a better sense of the underlying trend, also eased by more than expected.

The data, which is among the final major releases ahead of the Fed’s next meeting at the end of the month, is unequivocally good news for the Fed. But it could prove to be short-lived now that fighting has resumed between the U.S. and Iran and oil prices have again jumped higher.

How inflation evolves in the near-term will have direct implications for how some officials think about the urgency around raising rates to get inflation back to the Fed’s 2 percent target. That target has been missed for half a decade.

The Fed’s focus on inflation stems partly from the fact that the labor market is on solid footing, as Mr. Warshhighlighted on Tuesday. “We’re seeing relatively few layoffs, only slight variance in the rate of job vacancies, and solid growth in nominal wages,” he said.

Investors expect roughly even odds of a rate increase at the central bank’s meeting on July 28-29 — a divergence that has been further fueled by Mr. Warsh’s unwillingness to provide explicit signals about the future path for policy.

Other Fed officials have instead filled the gap.

Christopher J. Waller, a governor, said on Monday that he would need to see several months of lower inflation data to feel confident in the trajectory of price pressures. If that pans out, he said, it would make sense for the Fed to continue holding rates steady. “Hot” or stronger than expected inflation data would buttress the case for imminent rate increases, he added.

Last week, John C. Williams, president of the Federal Reserve Bank of New York, suggested that monthly readings above 0.2 percent in the second half of the year for the Personal Consumption Expenditures price index, once volatile food and energy items are excluded, would point to a more persistent inflation problem that may necessitate the Fed taking action. That “core” index, which the Fed closely monitors, rose 0.3 percent in May.

An overarching concern for Fed officials is not just price pressures stemming from the war with Iran, which pushed inflation to a three-year high this summer. But it is price gains stemming from soaring demand fueled by the build out of infrastructure for artificial intelligence. Prices for semiconductors, computer chips, servers and other items related to the proliferation of the technology have risen sharply this year.

Mr. Warsh has acknowledged these rising prices, but he has also previously argued that higher productivity in its wake will over time help to keep a lid on inflation even as economic growth accelerates. On Tuesday, he told lawmakers that the Fed is “monitoring the implications for inflation and the labor market,” while striking an upbeat tone about the potential economic gains.

“We don’t know the extent to which the economy will benefit from the A.I. build out,” he said. “Yet it seems inevitable that what is now called ‘A.I. investment’ will soon be called just ‘investment.’”

Mr. Warsh has directed a group of external advisers, which include the venture capitalist Marc Andreessen, to lead a task force looking into how A.I. is impacting productivity and the labor market. It is one of five such groups that he has created to examine issues core to the Fed, forming the backbone of his plans to enact regime change at the institution.

Task forces related to how the Fed communicates, its $6.7 trillion portfolio of government bonds and mortgage-backed securities, and the data sources upon which it relies have also been created, as well as one focused on the central bank’s understanding of inflation.

Mr. Warsh’s goal is for the task forces to complete their work by the end of the year, after which policymakers will weigh in on how to establish proposed changes.

Economists and chief executives are divided over whether artificial intelligence is making American workers more productive yet.

Zoom out, though, and a quieter trend is hiding in the data. For years now, “labor productivity” — an economic measure of how much each worker produces — has been climbing at its fastest pace in at least two decades. Artificial intelligence is merely a fresh ingredient in the gumbo of forces propelling the trend, not the central one, at least for now. Tight labor markets, digitization and remote work are among other parts of the mix.

“I never thought I’d see this many years of really high productivity and, by the way, expect it to continue,” Jerome H. Powell told reporters in March, before he stepped down as Federal Reserve chair. “And we haven’t really started to see the effects of generative A.I.”

A potential win-win

In the best of times, productivity gains are a sign that workers are using new tools or updated methods to work more efficiently; smarter, not just harder. This can offer a win-win to workers, customers and business owners: If firms can produce more in the same or fewer work hours, then presumably they can increase revenue, reinvest in operations and pay workers more, all without sacrificing profitability — or relying on price increases to push profits higher.

Henry McVey, an investment chief at KKR, a private equity firm, said he was seeing exactly that across its portfolio — in health care, tech and retail. Restaurant chains are using cloud computing to manage inventory better. Remote work has helped companies hire from a bigger talent pool. Medical records have gone digital.

“I believe the productivity gains began coming out of Covid with the digitization of work, remote work and the implementation of machine learning — and we’re just scratching the surface on A.I.,” Mr. McVey said.

Another driver of sunnier productivity numbers has been low unemployment, which has stayed at or below 4.5 percent since October 2021 — the longest streak since the 1960s. When nearly everyone who wants a job has one, employers have to pay more to attract workers, which pushes them to find efficiencies elsewhere.

That can become self-reinforcing, said Chirag Lala of the Center for Public Enterprise, a nonprofit focused on economic development, especially if artificial intelligence starts paying off. “Once we get started on a trend with consumption, incomes or productivity, it’s like inertia,” he said. Breaking it takes a serious shock.

Staffing adjustments

Mr. McVey pointed to another, more solemn reason productivity is up: job cuts. There have been significant layoffs in finance and tech, two industries that generate an outsize share of corporate profits. Tech employment has shrunk for 18 consecutive months. Finance has lost more than 100,000 jobs since a peak in May 2025.

A Federal Reserve survey of businesses this spring noted that many companies said A.I.-driven efficiencies had allowed them to delay or skip hiring altogether. A separate index of corporate earnings calls, compiled by Bloomberg, reported a reduced appetite for hiring in nearly every industry.

In the Permian Basin in West Texas, the heart of America’s world-leading oil industry, companies are running leaner than ever, said Steve Pruett, chief executive of Elevation Resources. He credits industry consolidation, along with better drilling technology.

“We used to just drill two miles down and one mile out,” Mr. Pruett said. “As tech improved and we got better at it, we still drill two miles deep, but now we drill two miles out, the well produces more, there are better rates of return on those ‘longer laterals’ and better productivity per rig.”

Around the time Elevation was founded in 2013, the oil and gas industry employed about 200,000 people. By this summer that had fallen to roughly 115,000, even as profits and output per worker climbed.

The job loss is clearly bad news for the workers affected when companies become leaner. But economists generally view “doing more with less” as a plus for the economy overall.

For the “professional and business services” sector, tracked by the Labor Department, productivity growth has been at or above 3 percent annually since 2021. Employment in the sector has fallen since 2023, leading to a slew of discouraged job seekers — even as the health care, social assistance and education sectors have helped pick up the slack in overall job growth.

The economy’s continued better-than-expected growth, despite subdued immigration and waves of baby boomer retirements, is also a sign of the increased productivity among “prime-age” workers ages 25 to 54.

Reasons for caution

Not everyone is convinced of a rosy read on recent productivity data. Productivity numbers are notoriously noisy in the short run, skeptics note. And to the extent tech evangelists have attributed existing gains to artificial intelligence, some experts remain unconvinced. The Yale Budget Lab’s A.I. Labor Market Tracker, for instance, has found no clear link between A.I. adoption and employment changes.

“There are several possibilities here, and the productivity data in particular is really hard to interpret,” said Martha Gimbel, the Yale Budget Lab’s executive director.

Productivity is, most simply, output divided by work hours. But it is also measured by economists in “real” terms, meaning the “output” side of the equation is inflation-adjusted. So volatile spikes in inflation can drag down the headline productivity numbers, even when workers are no less efficient than before.

Last year’s tariffs and this year’s oil-price shock from the war with Iran both pushed inflation up, which may make productivity look weaker in the short run than it actually is. Still, oil prices have now fallen from the peaks during the war. If that holds, productivity data could look better later this year.

Who shares in the fruits?

Whether corporate efficiency gains will be shared with households is an open question. For years, pay has lagged productivity growth, diminishing laborers’ share of national income.

“If real compensation lags productivity growth, labor’s share falls,” said Jared Bernstein, who served as chair of former President Joseph R. Biden Jr.’s Council of Economic Advisers. Over the past decade, productivity growth has been double real compensation growth, according to Mr. Bernstein’s analysis.

An axiom in economics is that, at first, productivity shows up “everywhere except the productivity statistics,” as the Nobel laureate Robert Solow put it. It wasn’t until the 2000s, after all, that the productive effects of the internet and personal computing boom of the 1990s showed up.

Mike Skordeles, the head of U.S. Economics at Truist, a bank based in Charlotte, N.C., said he was already producing more research than previously — a result of improved tools for data analysis and modeling.

Only a few years ago, he said, “I would have had or hired three lower-level junior economists doing some of the charting and stuff that I can now do with the click of a button.”