Warsh: Inflation Not Slowing Down, Rates May Hike Soon

Fed Chairman Kevin Warsh emphasized that inflation is not slowing down and that policymakers must be confident it will reach their 2 percent target. He reiterated in a speech at the Fed's annual conference that price stability is not self-executing, nor does inflation necessarily mean-revert on its own.

In his first major address since becoming chairman in May, Warsh stated that financial conditions are not currently restrictive and interest rates remain the Fed's predominant tool for achieving their mandate. However, he stopped short of signaling a potential interest-rate hike at the upcoming September meeting.

The market reacted positively to Warsh's speech, with yields on two-year Treasuries rising by up to nine basis points to 4.32 percent and implied probabilities of a rate hike increasing above 50 percent.