Warsh Shifts Communication Approach in Jackson Hole Speech
BCA Research has observed a significant shift in Federal Reserve Chair Kevin Warsh's communication approach, evident from his first Jackson Hole speech. Unlike his earlier meetings, Warsh delivered a message closer to conventional central banking.
The firm noted that Warsh laid out a reaction function similar to the rest of the FOMC, providing clarity on how he would respond to incoming data. Notably, he reiterated the Fed's commitment to a 2.0% PCE inflation target and confirmed that the Fed funds rate remains the main policy tool.
BCA Research believes that the recent labor and inflation prints fell short of expectations, and therefore, it does not warrant a hike yet. The firm expects core PCE inflation to move lower as extreme price moves fade, with twelve-month core PCE running 88 basis points above core CPI.