Fed Chair Warns of Elevated Inflation, Interest Rate Hike Possible

Federal Reserve Chair Kevin Warsh addressed the Jackson Hole Economic Symposium on Friday, warning that inflation remains too high and interest rates may need to be raised.

Warsh said that despite a strong overall performance of the U.S. economy, with capital business investments and profits up 20% over the past year, underlying inflation is not moving quickly enough towards the central bank's goal of 2%. He noted that the Personal Consumer Expenditures index currently stands at 3.7%, which is above the Fed's target.

The Fed Chair pointed out that 54% of goods and services in the CPE index showed price increases above 3% over the last 12 months, and 49% did so over the past six months. This is considered 'well below the post-pandemic highs, but still elevated' according to Warsh.

Inflation expectations appear stable and well-anchored in the medium-term, but Warsh emphasized that this must be closely monitored by the Fed. He also warned of the potential consequences of failing to control inflation for everyday Americans, particularly those without financial assets.