New Federal Reserve Chairman Kevin Warsh faced Congress last week for the first time, but a Cato Institute economist says lawmakers may have squandered their best chance to press him before rates move.

In a commentary published Monday, Cato's Jai Kedia argued an outsized share of the questioning went to artificial intelligence, calling it "a poor use of scarce oversight time."

"That is the real cost of spending the hearings on trendy topics like artificial intelligence, while the issues that will shape policy this year went somewhat underexamined," Kedia wrote.

Warsh and Cook Split on AI Inflation

Pressed on whether massive AI investment may prove inflationary, Warsh said, "I don't view one change in prices as necessarily being inflationary," arguing supply would likely grow to catch up with demand. He contrasted that with a foreign conflict, which he said tends to shrink the economy's supply side.

Not everyone at the Fed appears as relaxed. Gov. Lisa Cook warned the same day that AI spending may drive significant price increases across chips, software and utilities, saying inflation risks now outweigh employment risks in her view. Warsh described the internal debate as "one of the good family fights."

The unresolved Iran conflict cuts the other way. Oil jumped more than 2% Tuesday on fresh attacks, with Brent back above $91, threatening the energy relief that drove June's cooling. Funds like the United States Oil Fund (USO), which tracks WTI, have swung on each ceasefire collapse. Kedia asks whether the Fed has concrete contingency plans for the war's outcomes, a question he says went unasked.

The Questions That Went Unasked

Kedia listed four underexamined issues: the near-term plan to return inflation to 2%, mixed labor signals, Iran-driven inflation risk, and whether higher interest payments on bank reserves could push the Fed back into operating losses.

Kedia argues the labor market's flat unemployment rate masks weakness, saying job growth has stagnated and the rate only holds steady because workers have left the labor force. Warsh's own testimony offered the opposite read, describing job creation as keeping pace with the workforce.

Inflation did cool in June, with the CPI falling 0.4% on the month and the annual rate easing to 3.5% from May's 4.2%, but this is still well above the Fed's 2% target. Warsh played down the improvement, telling lawmakers "these are all imperfect measures of the state of underlying inflation."

What Polymarket Says

Traders on Polymarket price roughly a 12% chance of a hike at the July 28-29 meeting. The odds of a rate hike this year stand at 62%, while the probability of a rate cut has fallen to just 15%.

Congress likely won't question Warsh again for months. The press gets its chance after the July 29 decision.