Warsh Signals Potential Rate Hikes as Inflation Remains Stubborn

Fed Chair Kevin Warsh signaled that interest rates may need to be hiked to combat stubbornly high inflation. Speaking at the annual Jackson Hole Economic Policy Symposium in Wyoming, Warsh acknowledged that US reports show inflation has cooled a bit, but 'they do not tell me that underlying trends have meaningfully improved.'

Warsh pointed out that data show inflation remains above the central bank's 2% target. He emphasized that short-term interest rates are the Fed's 'predominant tool' to combat higher prices.

The comments from Warsh appeared to reassure Wall Street that fighting inflation remains the priority for the central bank. While he didn't imply a rate hike is imminent, he seemed to dismiss perceptions that inflation is no longer a threat.

Warsh's remarks sparked a mixed reaction among economists, with some interpreting them as a clear signal of potential future actions and others viewing them as vague. The Fed next meets on September 15-16, but Warsh's comments don't necessarily signal a rate hike then.