Warsh Signals Potential Rate Hikes to Combat Persistent Inflation

Federal Reserve Chair Kevin Warsh signaled that inflation remains too high and suggested interest rates may need to be raised in the coming months to bring it down. In his first high-profile speech at the Fed's annual conference in Jackson Hole, Wyoming, Warsh acknowledged that recent U.S. reports show inflation has cooled a bit, but 'they do not tell me that underlying trends have 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.' The Fed chair's comments reassured Wall Street that fighting inflation remains the priority for the central bank.

The U.S. stock market held steady after the speech, but expectations are building in the bond market for the Fed to hike interest rates. The yield on the two-year Treasury moved from 4.22% to 4.30%, a sign that investors expect short-term yields to move higher.