Dollar Jumps After Warsh Comments Hint at Possible Rate Hikes
The US dollar rose to its highest point of the day after Federal Reserve Chair Kevin Warsh hinted that interest rate hikes may be necessary if policymakers doubt inflation is heading back towards the central bank's 2% target.
Warsh made these comments during his debut speech at the Jackson Hole symposium of central bankers, where he acknowledged financial conditions do not appear restrictive and highlighted the need for action should inflation not show signs of cooling.
Following Warsh's remarks, expectations for a rate hike of at least 25 basis points at the Fed's September meeting jumped to about 50%, up from around 35% beforehand. The dollar index rose by 0.35% to 99.46 after hitting its highest level since August 19.
Eugene Epstein, head of trading and structured products at Moneycorp in Stamford, Connecticut, expressed skepticism towards Warsh's comments, saying 'At least for the time being, we're getting more of the same Warsh-speak that we saw prior to any of the Fed decisions that he had been a part of. Meaning he's saying a lot, but none of this seems really substantive.'