Warsh Warns Inflation Fight Isn't Over, Rate Hike Looms in September

Fed Chair Kevin Warsh sent a clear signal to markets that interest rates could rise again in September if inflation doesn't settle down. In his first major speech at the Jackson Hole conference, he stressed that fighting inflation remains the Fed's top priority.

Warsh reaffirmed the central bank's 2% inflation goal, measured by the Personal Consumption Expenditures index, saying it is 'firm and fixed.' He emphasized that rates are the Fed's 'predominant tool' to rein in prices and dismissed concerns that tighter financial conditions might hurt growth.

The comment pushed market expectations higher for a rate hike at the central bank's mid-September meeting. The European Central Bank's Primoz Dolenc hinted at a September rate increase, citing stubborn inflation and Middle East tensions, while Austria's Martin Kocher pointed to 3.3% August inflation as no room for 'complacency.' In contrast, the Bank of England's governor took a softer tone, indicating no immediate plans to raise borrowing costs.