Warsh Signals Rate Hike Possibility as Inflation Remains Above Target

Federal Reserve Chairman Kevin Warsh emphasized the need for confidence in inflation's decline during his keynote speech at the Fed's Jackson Hole economic symposium. He stated that if policymakers don't get the confidence they need that inflation is heading down to 2%, the central bank will have work to do.

Warsh acknowledged that inflation has been above target for six years and expressed concerns about its persistence, saying 'The Fed's predominant focus right now should be on prices.' He noted that recent data do not tell him that underlying trends have meaningfully improved.

Despite his previous reluctance to signal a possibility of higher rates, Warsh's speech was seen as hawkish by analysts. Rate futures are pricing in about a 60% chance of a rate hike next month, up from about 40% before the speech.