Warsh Sounds Alarm on Inflation Risks in Hawkish Jackson Hole Address

Federal Reserve Chairman Kevin Warsh expressed concerns about inflation in his Jackson Hole keynote address, but did not provide forward guidance. He stated that recent inflation measures were better than expected, but did not show underlying trends have improved.

Warsh emphasized the importance of maintaining a 'quieter' central bank and avoiding excessive communication that could inject uncertainty into financial markets. He maintained his commitment to the Fed's 2% inflation target and reiterated that the personal consumption expenditures (PCE) price index is a firm, fixed target.

The speech was seen as hawkish by some market participants, with the two-year Treasury yield jumping over 8 basis points during the address. This suggests that the Fed may not be done fighting inflation, despite recent data showing PCE inflation holding firm at 3.7% year-over-year in June.

Other central bankers have expressed similar concerns about inflation, with some advocating for rate increases. Regional Fed presidents Jeffrey Schmid and Beth Hammack recently called for higher rates, while Boston Fed President Susan Collins stated she would support action if inflation does not moderate at her preferred speed.