Warsh Signals Possible Rate Hikes as Inflation Remains High

Federal Reserve Chair Kevin Warsh has signaled that interest rate hikes may be needed to combat high inflation, which remains above the central bank's target of 2 percent. Speaking at the Fed's annual conference in Jackson Hole, Wyoming, Warsh acknowledged that recent US data show a slight cooling of inflation, but emphasized that 'underlying trends have not meaningfully improved.'

'We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,' Warsh said. 'Otherwise, we have work to do.' He noted that 54 percent of goods and services tracked by the government have seen price increases of 3 percent or higher in the past year, down from a pandemic peak but still 'well above' the 32 percent that saw such increases in the two decades before the pandemic.

The Fed chair faces high stakes with his speech, as questions swirl around Wall Street about his focus on fighting inflation. Some economists have argued that Warsh could say more about his views on Fed policy without tipping his hand about future actions. However, Warsh reiterated his skepticism about providing 'forward guidance' or outlining his broad approach to interest-rate policy.