Warsh Signals Hawkish Tone at Jackson Hole

Federal Reserve Chair Kevin Warsh signaled that policymakers would have 'work to do' if inflation pressures don't move toward the 2% target, sparking a market reaction. Bitcoin fell below $80,000 after Warsh's comments pushed short-term Treasury yields higher, weighing on risk-sensitive assets. Gold prices dropped nearly 3% as traders increased bets on a September rate hike and the dollar strengthened.

Warsh's first major address as Federal Reserve chairman provided more detail on his views of inflation and monetary policy, although he stopped short of signaling whether he would support a rate increase at the Fed's September meeting. He reiterated that the central bank remains committed to its 2% inflation target, describing it as 'a firm and fixed target.'

Markets responded by increasing expectations for a September hike, with the implied probability rising above 50%, from around 36% before the speech, according to federal funds futures. The Fed is due to receive August consumer price data on September 11, shortly before its September 15-16 policy meeting.