Warsh Tackles Inflation, Sets Stage for FOMC Showdown
Federal Reserve Chair Kevin Warsh delivered a hawkish message at the Jackson Hole economic policy symposium, raising the prospect of a clash with President Trump's administration.
The speech broke Warsh's silence on monetary policy and signaled a greater willingness to tighten. He stated that inflation is a more serious problem than employment and identified the policy rate as the main tool to address it.
Warsh said the Fed 'will do what it takes if underlying inflation is not moving toward our 2% target at a sufficient pace,' leaving a rate increase on the table. The two-year yield climbed to a one-month high of 4.35% intraday, while the 10-year yield rose to 4.72%. The dollar index increased by 0.55% to 99.7.
The probability of a 0.25 percentage point increase at the September 15-16 meeting, as measured by CME Group's FedWatch tool, rose to 57.0%, up from 39.9% a week earlier. The shift could put Warsh on a collision course with President Trump.