Warsh Warns of Inflation Action, Triggers Rate Hike Fears

Federal Reserve Chair Kevin Warsh delivered a speech at Jackson Hole, signaling that policymakers would need to take action if inflation does not move towards the target rate of 2%. He stated that recent readings on PCE and CPI were better than expected but did not demonstrate a meaningful improvement in underlying inflation trends. 'Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,' Warsh said.

Markets responded by increasing expectations for a September rate hike, with the implied probability rising above 50% from around 36%. This pushed short-term Treasury yields higher, weighing on risk-sensitive assets. Bitcoin fell below $80,000, dropping as much as 3.2% to $77,427.

Gold prices also declined nearly 3%, falling to $4,457.17 an ounce. The dollar strengthened, making gold more expensive for buyers using other currencies. Oil prices slid, with Brent and WTI on track for weekly losses due to traders weighing the implications of a potentially more hawkish Federal Reserve.