Markets Bet Against Warsh's Rate Hike Calls

The Federal Reserve's credibility is being questioned by markets following Kevin Warsh's speech at Jackson Hole, despite higher odds of a September rate hike.

Warsh's keynote raised the probability of a September increase from around 35% to roughly 57%, which has now risen to about 65%. However, many investors remain skeptical about the Fed's resolve.

The bond market is unconvinced, with long-term yields continuing to rise. The 10-year yield stands at 4.8%, and the 30-year near 5.28%, indicating markets expect inflation to persist above target.

President Trump has been applying pressure on the Fed for lower rates and potential changes to the Board's composition, which may limit the central bank's ability to adopt a more hawkish stance.