Warsh Warns Inflation Remains Elevated, Sending Bitcoin and Gold Prices Reeling

Federal Reserve Chair Kevin Warsh delivered his first major address as chairman at Jackson Hole on Friday, signaling that inflation remains a top concern for the central bank. According to Warsh, recent price pressures have not meaningfully slowed and policymakers will need to take action if they do not move toward the 2% target.

The speech sent shockwaves through financial markets, with Bitcoin falling below $80,000 due to higher short-term Treasury yields weighing on risk-sensitive assets. Gold prices also plummeted nearly 3%, as traders increased bets on a September rate hike and the dollar strengthened.

Warsh emphasized that the Fed's commitment to its 2% inflation target remains firm and fixed, but expressed concerns over recent readings of PCE and CPI data. He stated, 'Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.'

Markets responded by raising expectations for a September rate hike, with the implied probability rising above 50% from around 36% before Warsh's speech.