Warsh Warns Inflation Concerns May Warrant Higher Interest Rates

At the annual Federal Reserve symposium in Jackson Hole, Wyoming, Chairman Kevin Warsh expressed concern about inflation and hinted that interest rates may need to rise if progress is not made on easing price pressures.

Warsh noted that this summer's inflation readings were better than expected, but emphasized that they do not indicate a significant improvement in underlying trends. He stated that the Fed must be confident that underlying inflation is moving towards its 2% goal 'clearly and at sufficient speed,' or else there is work to be done.

The chairman also emphasized his commitment to a 'quieter' central bank, one that provides more purposeful communications rather than relying on forward guidance. He acknowledged the benefits of artificial intelligence and said business and consumer spending have held up well, but noted a slowdown in hiring attributed to a flattening labor supply.

Market participants reacted by raising the possibility of a rate hike at the September policy meeting to 45.7%, about 10 percentage points higher than a day ago, according to the CME Group's FedWatch.