Warsh Signals Rate Hike Possibility Amid Elevated Inflation

US Federal Reserve Chair Kevin Warsh signaled that interest rates may need to be raised if inflation remains elevated. This hawkish message prompted markets to increase bets on a rate hike as soon as next month.

The comments marked Warsh's clearest indication yet that higher interest rates could be necessary to bring persistent price pressures under control. He stressed the Fed's commitment to its 2% inflation objective and indicated that policymakers would need to act if underlying inflation does not improve enough.

Financial markets reacted swiftly to the comments, with the yield on the policy-sensitive two-year U.S. Treasury note jumping 11 basis points to 4.34%, its highest level in a month.