Warsh Warns Fed Has Work to Do on Inflation, Sends Yields Higher

Federal Reserve Chair Kevin Warsh warned that the central bank has 'work to do' on inflation, signaling a hawkish stance in his keynote address at the Jackson Hole monetary policy conference.

Warsh acknowledged that recent PCE and CPI data had been better than expected, but emphasized that underlying trends have not improved meaningfully. He noted that financial conditions are not restrictive overall, although there are signs of strain in certain sectors such as housing and agriculture.

The Fed chair declined to spell out how the central bank would respond to future economic data, but stated that policymakers must be confident that underlying inflation is moving towards the 2% PCE target at sufficient speed. This hawkish tone sent two-year Treasury yields jumping 5 basis points to 4.28%, while 30-year yields slipped 1 basis point to 5.19%, according to Bloomberg.

Warsh's speech was seen as an opportunity for him to address market concerns about his commitment to tackling inflation, which has been hovering above 3%. His comments were welcomed by some, with George Catrambone, head of fixed income at DWS Americas, describing them as 'the exact forward guidance' the market had been looking for.