Warsh Signals Rate Hikes May Be Needed to Combat Elevated Inflation

Fed Chair Kevin Warsh signaled that inflation is still too high and may require rate hikes to bring it down in the coming months. Speaking at the annual Jackson Hole Economic Policy Symposium, Warsh acknowledged that recent U.S. reports show a slight cooling of inflation, but this is not enough. 'We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,' he said.

Warsh's comments reassured Wall Street that fighting inflation remains the priority for the central bank. He pointed out that inflation remains stubbornly above the Fed's 2% target, with 54% of goods and services tracked by the government experiencing price increases of 3% or higher in the past year.

While Warsh did not imply an imminent rate hike, his speech indicated that rates may not be high enough to bring inflation down. 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.