Warsh Warns Fed Will Take Action on Inflation If Target Not Met

Federal Reserve Chairman Kevin Warsh acknowledged that the US central bank has 'work to do' if underlying inflation does not return to its target of 2% as soon as policymakers would like. This is a subtle but significant shift in tone from previous remarks, and it implies that interest rate hikes may be on the horizon.

In a speech prepared for delivery at the Fed's Jackson Hole economic symposium in Wyoming, Warsh emphasized the importance of confidence in achieving price stability. He stated that 'otherwise, we have work to do', meaning that if policymakers are not confident that inflation is returning to target, they will need to take action.

This message was met with applause from an audience of global central bankers, who were hungry for more concrete guidance on monetary policy. Markets also took notice, and bets on a rate hike next month increased, although it's worth noting that Warsh did not suggest a timeline for rate hikes in his speech.