Warsh Vows to Tame Inflation, But Experts Warn of Higher Interest Rates

Kevin Warsh, Chairman of the Federal Reserve, has reaffirmed his commitment to bringing inflation back down to the central bank's official target of 2%. Speaking during a press conference on July 29, Warsh emphasized that there is 'no soft inflation target' and that the Fed will 'do its darndest' to meet this goal. Wall Street appears to be taking him at his word, with interest rate expectations suggesting an average inflation rate of around 2.25%.

However, not everyone is optimistic about the Fed's ability to achieve this target. Cleveland Federal Reserve President Beth Hammack has warned that more than one interest rate hike may be necessary to rein in broadening inflation. She dissented at the Fed's July policy meeting when rates were held steady, and believes that current interest rates of around 3-3.75% are not restrictive enough.

Hammack cautioned that the longer the Fed waits to act, the harder it will be to bring inflation back down. Her views are echoed by prediction market traders, who expect July's consumer price index (CPI) reading to come in below the Dow Jones consensus forecast of 3.4% on a year-over-year basis.