Warsh Keeps Rate Hikes in Play Amid Housing Strain

At the Federal Reserve Bank of Kansas City's annual economic policy symposium in Jackson Hole, Wyoming, Federal Reserve Chair Kevin Warsh acknowledged that housing is under strain. However, he did not suggest that this would steer the Fed away from another interest-rate hike.

'Credit and loan markets are showing few signs of policy restraint,' said Warsh. 'Certain sectors, like housing and agriculture, are showing strains.'

Despite these weaknesses in specific areas, Warsh described the overall economy as resilient. He noted that business investment is growing at its fastest rate since 2021, consumer spending remains healthy, corporate credit is readily available, and unemployment remains low.

'The Fed's predominant focus right now should be on prices,' said Warsh. Inflation, which rose 3.7% over the 12 months ending in July according to the Personal Consumption Expenditures Price Index, remains above target at 4.1% annualized rate over six months.

Warsh emphasized that one or two encouraging readings will not be enough to convince him that underlying inflation is moving towards the Fed's 2% objective 'clearly and at sufficient speed.' He reiterated that the Fed must remain committed to its mandate of low inflation, even if it means tighter monetary policy.