Warsh Signals Rate Hikes May Be Needed to Meet Inflation Target

Federal Reserve Chairman Kevin Warsh emphasized the importance of meeting the central bank's two percent inflation target during his keynote speech at the Fed's Jackson Hole economic symposium in Wyoming. According to Warsh, policymakers must see clear progress toward their objective or the U.S. central bank will 'have work to do,' signaling that interest rate increases could be needed if price pressures persist.

Warsh stated, 'We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.' The Fed's preferred Personal Consumption Expenditures Price Index was running at 3.7 percent annually in July, with about half of the items in the PCE basket rising at an annual rate above three percent.

Markets raised bets on a rate hike next month following Warsh's remarks, while the audience of global central bankers applauded his comments. Former Philadelphia Fed President Patrick Harker said, 'You can't keep saying this is our job' and then not act.