Warsh Opens Door to Rate Hike in September Amid Inflation Concerns

Federal Reserve Chair Kevin Warsh has raised the stakes for the central bank's next meeting in mid-September, potentially paving the way for a rate hike if inflation doesn't improve. In a speech at the Jackson Hole economic conference, Warsh said that he and other Fed officials who supported keeping rates unchanged after their July 28-29 meeting 'thought the wiser course was to await new information' before deciding whether to change interest rate policy.

However, Warsh noted that such evidence of cooling inflation hasn't emerged, even as gas prices have come down somewhat. This suggests that he wanted to see clear signs of improving inflation before remaining on hold. By sending these signals, Warsh has raised expectations for a hike next month, and if he doesn't follow through, his credibility could take a hit.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, downplayed the importance of the elections, saying that Fed officials focus on 'what is the state of the economy, and what do we need to do to stabilize prices and maximize employment?' Kenneth Rogoff, a Harvard economist, expressed concern about Fed independence but didn't elaborate.