Warsh Warns: Inflation 'More Concerning' Ahead of Potential Rate Hike

At the annual Jackson Hole Economic Policy Symposium, Federal Reserve Chairman Kevin Warsh expressed concern about high inflation. Until he and his colleagues are confident that inflation is moving toward their 2% target rate 'clearly and at a sufficient speed,' they 'have work to do.' This hawkish tone sparked a reaction in financial markets.

Immediately after Warsh's speech, stocks erased daily gains and the probability of an interest rate hike at the Fed's next meeting in mid-September nearly doubled. According to CME FedWatch, as of Friday afternoon, the market saw a 57% chance of a quarter-point increase.

Warsh highlighted ways he planned to lead the Fed differently than his predecessors regarding forward guidance. He emphasized that 'in normal times, the role of forward guidance should be limited and circumscribed,' to avoid creating ambiguity in the name of clarity.