Warsh Inflation Warning Lifts Rate Hike Bets to 57%

Federal Reserve Chair Kevin Warsh's warning about inflation at the annual symposium in Jackson Hole, Wyoming, sent shockwaves through the market. He stated that recent PCE and CPI readings did not indicate a meaningful improvement in underlying inflation trends.

The remarks increased expectations for a potential interest rate hike in September, with CME Group's FedWatch tool showing a 57% probability of a rate increase on Friday, up from 35.4% the day before.

Treasury yields at the short end of the curve moved higher following the speech, while longer-term yields remained roughly flat.