Fed Chief Warsh's Anti-Inflation Stance Sends Rate Hike Odds Soaring

Kevin Warsh, Federal Reserve Chairman, delivered an anti-inflation message this week, indicating that if inflation data do not improve, he would raise interest rates. This stance surprised Harvard professor and former IMF chief economist Ken Rogoff, who noted that by hiking rates, the Fed would demonstrate its independence but warned of unpredictable consequences.

Rogoff had originally expected Warsh to merely signal a future hike rather than commit to one. He described Warsh's speech as his best so far, clearing up confusion from a July press conference where Warsh pointed to higher bond yields when asked about rate hikes.

The market odds for a September rate hike jumped to 60% from 35% after Warsh's speech, according to Ken Rogoff. He also commented on Treasury Secretary Bessent's announcement to double buybacks of long-term Treasurys, which was poorly received in the bond market.