Warsh Inflation Warning Sets Up Crucial September Rate Decision

US Federal Reserve Chairman Kevin Warsh has delivered a tough message on inflation, setting up the central bank's September policy meeting as a pivotal moment in its mission to tame prices.

In a speech at the Fed's annual conference in Jackson Hole, Wyoming, Warsh warned that price pressures have yet to meaningfully slow and that the central bank must be confident that underlying inflation is moving towards its 2 per cent target.

Warsh's remarks were interpreted by economists and investors as a threat to raise interest rates when policymakers next meet on September 15-16, with traders increasing the implied probability of a rate hike in September to above 50 per cent from around 35 per cent before the speech.

The potential for a rate hike ahead of midterm elections in November could stoke criticism from President Donald Trump, who appointed Warsh and continues to call for cheaper borrowing costs.