Fed Chair Kevin Warsh Signals Inflation Concern at Jackson Hole

In remarks scheduled for August 28 at the Federal Reserve’s annual Jackson Hole symposium, Federal Reserve Chairman Kevin Warsh warned that “underlying inflation” remains above the 2 percent target and that the Fed “has work to do” if price pressures do not ease.

The Straits Times

Warsh, appointed chair earlier this year, has emphasized a “quieter Fed” and avoided detailed forward guidance. His speech came as the policy rate has been held steady in the 3.50-3.75 percent range since December. He reiterated that the dual mandate of price stability and maximum employment are compatible.

NBC News

• The Personal Consumption Expenditures (PCE) price index is 3.7 percent year-over-year.

Warsh warns Fed has 'work to do' as inflation progress stalls

• 54 percent of the 199 PCE components posted price gains above 3 percent in the past 12 months, down from a pandemic-era high of about 77 percent.

Warsh warns Fed has 'work to do' as inflation progress stalls

• The CME Group’s FedWatch tool showed a 55.7 percent implied probability of a 25-basis-point hike at the September meeting, while another source reported a 46 percent chance on August 27.

The Straits Times

• The 2-year Treasury note rose about 8 basis points to 4.31 percent, its highest since late July.

The Straits Times

Warsh described the labor market as “stable” and the broader economy as “robust,” noting that credit markets show “few signs of policy restraint.” Heather Long, chief economist at Navy Federal Credit Union, said the speech raised the probability of a September hike by roughly 20 percentage points. Elmar Völker of LBBW warned that “if core inflation doesn’t ease up, then an interest rate hike is very much on the table.”

Fed Chairman Warsh Expresses Concern Over High Inflation

Sources differ on the market’s pricing of a September hike: cnbc cites a 55.7 percent probability, whereas straitstimes notes a 46 percent chance on August 27. Yield reactions also vary, with cnbc reporting the 2-year note at 4.31 percent and straitstimes citing a rise to 4.29 percent. No source provides a definitive timeline for any rate change, and the impact of upcoming August inflation data (scheduled for September 15) remains uncertain.

The Straits Times

• “Warsh explicitly said this summer's encouraging inflation readings don't indicate 'meaningful' improvement on inflation. Bond markets reacted swiftly by pricing in a hike.” — Kevin Warsh

CNBC

• “I stand here today committed to a discipline, not to a decision,” — Kevin Warsh

CNBC

• “It’s the Fed’s job to make sure that inflation expectations do not get unanchored,” — Kevin Warsh

The Straits Times

• “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That's our job, our mandate and our charge to keep,” — Kevin Warsh

CNBC

The Fed’s next policy meeting is set for mid-September, with the August inflation report slated for release on September 15. Market participants will watch that data, along with labor-market figures, to gauge whether the “work to do” Warsh described will translate into an actual rate adjustment.

NBC News