Warsh Signals Rate Hikes May Be Needed to Combat Stubborn US Inflation

Fed Chair Kevin Warsh has signaled that rate hikes may be necessary to combat stubbornly elevated US inflation. In his first high-profile speech at the Fed's annual conference in Jackson Hole, Wyoming, Warsh acknowledged that recent US reports show inflation has cooled a bit, but 'they do not tell me that underlying trends have meaningfully improved.'

Warsh pointed to data showing that inflation remains above the central bank's 2% target and noted that more than half of goods and services tracked by the government have seen price increases of 3% or higher in the past year. He also stated that short-term interest rates are the Fed's 'predominant tool' for combating higher prices.

The comments from Warsh appeared to reassure Wall Street that fighting inflation remains the priority for the central bank, and investors now see a roughly equal chance of a rate hike at the Fed's Sept. 15-16 meeting as before his speech.