Warsh Sets Stage for Interest Rate Hike Amid Rising Inflation Concerns
Federal Reserve Chairman Kevin Warsh is reportedly prepared to support an interest rate hike at the September meeting if inflation data remains high, according to a Financial Times report. This comes as investors believe Warsh has not provided sufficient guidance on how to contain the new wave of inflation caused by the Iran war and rising energy prices.
The Fed chairman appears determined to maintain his simple and concise communication style, which differs from previous chairmen who offered comprehensive guidance to the markets. In fact, US President Donald Trump wants the institution to lower interest rates, not raise them, and has been frequently calling Warsh about this issue since he took office.
Following the news, expectations of an interest rate hike in the markets strengthened, with the probability of a 25 basis point increase in September priced at around 55 percent. This rose to 56.7 percent after the Financial Times article was published, while the yield on the two-year US Treasury bond increased by 4 basis points to 4.22 percent.