Fed's Warsh Sounds Alarm on Inflation, Keeps Rate Hike Option Open

Federal Reserve Chair Kevin Warsh delivered his clearest warning yet that stubbornly high inflation could force the U.S. central bank to take further action on interest rates. Speaking at the Jackson Hole symposium, Warsh said the inflation outlook remains a source of concern and suggested the Fed would have to act if underlying price pressures failed to move convincingly toward its 2% target.

Warsh's remarks stopped short of announcing a rate increase but marked the strongest indication so far that the Federal Reserve is keeping the option of higher interest rates firmly on the table. The latest data has offered little room for complacency, with the Fed's preferred inflation measure coming in at 3.7%, well above the central bank's target.

Warsh emphasized a data-driven approach and his preference for giving markets less explicit advance notice about future policy decisions. He pointed to resilience in business investment, corporate earnings, and consumer spending, while describing the employment situation as broadly consistent with full employment. The U.S. unemployment rate stood at 4.1%, according to the figures cited in his remarks.