Warsh Signals Rate Hikes May Be Needed to Combat Elevated Inflation

Kevin Warsh, Federal Reserve Chair, has signaled that interest rate hikes may be needed to bring down inflation, which remains elevated. In his speech at Jackson Hole, Wyoming, he acknowledged that recent US data show inflation has cooled somewhat but emphasized the need for underlying trends to improve.

Warsh noted that 54% of goods and services tracked by the government have seen price increases of 3% or higher in the past year, well above the pre-pandemic level. He also expressed concern about the persistence of high inflation, stating 'we must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed.'

Warsh's comments suggest that interest rates may not be high enough to bring down inflation to the Fed's 2% target, but he stopped short of committing to a specific policy direction. The next Fed meeting is scheduled for September 15-16.