Warsh Signals September Rate Hike as Inflation Remains Stubborn

Kevin Warsh delivered his first Jackson Hole speech as Federal Reserve chair, sending a clear message to markets: inflation is still too high and another rate increase remains on the table.

Expectations for a September rate hike jumped from around 40% before the speech to about 60%, while short-term Treasury yields moved higher as traders reconsidered a policy path that had looked more benign only days earlier.

Warsh emphasized that financial markets provide valuable information to the Fed when their signals remain 'unfiltered' and not influenced by attempts to anticipate what policymakers will do next.

The new chairman's philosophy creates tension between wanting markets to become less dependent on Fed forecasts and verbal cues, yet still needing them to determine policy decisions.