Warsh Warns: Inflation Trend Still Unclear, Rate Hike Odds Rise

The US stock market closed lower on Friday after Federal Reserve Chair Kevin Warsh expressed concerns about inflation in his speech at the annual symposium in Jackson Hole, Wyoming. The S&P 500 fell 0.26% to 7,711.05, while the Nasdaq Composite dropped 0.53% to 26,400.56. The Dow Jones Industrial Average slipped 0.02% to 53,558.38.

Despite Friday's declines, the Dow gained 0.5% for the week. Warsh said recent PCE and CPI readings did not indicate that underlying inflation trends had 'meaningfully improved.' He emphasized that the Federal Reserve needs to be confident that inflation is moving toward its 2% target 'clearly and at sufficient speed.'

The comments led to an increase in bets on a September rate hike, with the probability rising to around 57% according to CME Group's FedWatch tool. Treasury yields at the short end of the curve moved higher following the speech.