US Federal Reserve Chair Signals Possible Rate Hikes to Combat Elevated Inflation

US Federal Reserve Chair Kevin Warsh signaled that interest rates may need to be raised in the coming months to combat elevated inflation. Speaking at a high-profile speech in Jackson Hole, Wyoming, Warsh acknowledged that while recent US reports show inflation has cooled slightly, 'they do not tell me that underlying trends have meaningfully improved.'

Warsh emphasized that the central bank must ensure that underlying inflation is moving towards its 2% target and doing so at a sufficient speed. He noted that in the past year, 54% of goods and services tracked by the government have seen price increases of 3% or higher, which is well above the 32% seen in the two decades before the pandemic.

The speech was closely watched as it provided clarity on Warsh's economic outlook. While he did not imply that a rate hike is imminent, his comments seemed to dismiss perceptions that inflation is not a threat. The US stock market held steady after the speech, but expectations are building in the bond market for the Fed to hike interest rates.