Warsh Warns Inflation Above Target, Sparking Rate Hike Bets

Federal Reserve Chairman Kevin Warsh has sparked bets that interest rates will rise soon after warning of inflation at a speech in Jackson Hole, Wyoming. He noted that prices are still climbing faster than the central bank's target rate and stated that 'inflation is running above our 2% target.'

The consumer price index shows prices have risen 3.4% over the twelve months ending in July, while the Fed's preferred measure puts inflation at 3.7% during that period.

Warsh remains tight-lipped about where interest rates are heading, but investors took his tough talk as a signal that rates may need to be raised as early as next month. Before his speech, the odds of a September rate hike were around one in three, but after his comments, that likelihood rose above 50/50.