Warsh Signals Rate Hike If Inflation Persists Above Target

Federal Reserve Chairman Kevin Warsh signaled that the central bank may need to raise interest rates if inflation persists above its target. Speaking at the Fed's Jackson Hole economic symposium in Wyoming, Warsh emphasized the importance of bringing underlying inflation down to 2%.

Warsh's comments were seen as a shift from his previous stance, and markets responded by increasing bets on a rate hike next month. The Fed chief acknowledged that the labor market is stable but noted that inflation remains too high, with the Personal Consumption Expenditures Price Index at 3.7% on an annual basis as of July.

Warsh's remarks were met with applause from an audience of global central bankers, who have been looking for clear signals from the Fed on its policy intentions. Former Philadelphia Fed President Patrick Harker observed that the Fed has been above target for six years and that 'actions speak way louder than words.'