Warsh Signals Potential Rate Hikes to Combat Elevated Inflation

Federal Reserve Chair Kevin Warsh acknowledged that recent US data show inflation has cooled slightly, but he emphasized that underlying trends have not improved.

In a speech at Jackson Hole, Wyoming, Warsh said that while some goods and services saw price increases of 3% or higher, it's still well above the pre-pandemic average. He noted that 54% of tracked goods and services had such increases in the past year, down from 65% during the pandemic peak.

Warsh signaled that interest rates may need to rise to bring inflation back down to the Fed's target rate of 2%. However, his speech did not necessarily imply a rate hike at the next meeting on September 15-16. Warsh emphasized that short-term interest rates are the 'predominant tool' the Fed can use to lower inflation.