Warsh Hints at Hawkish Stance as Inflation Concerns Mount

At the annual Jackson Hole conference, Federal Reserve Chair Kevin Warsh continued to advocate for a 'quieter Fed', but his speech also hinted at a hawkish stance on interest rates. In his remarks, Warsh emphasized that inflation has become increasingly concerning and suggested that core inflation not slowing down could prompt a rate hike.

According to LPL financial chief economist Jeffrey Roach, there was no new information in Chair Warsh's speech, but the chair did reiterate that he believes the labor market is at full employment. This suggests a willingness to raise interest rates, as Roach noted that this message has been consistent with previous policy statements.

The market currently prices in a 57% chance of a September rate hike, according to CME Fedwatch. However, Bill Adams, chief US economist at Fifth Third Bank, believes that the bar for a hike will be higher due to expected negative payrolls data this week. A consecutive monthly decline in payrolls is rare outside of recessions, and if it occurs again in August, it could raise concerns about employment.