Warsh Warns of High Inflation, Sending Interest Rate Hike Odds Soaring

At the annual Jackson Hole Economic Policy Symposium on August 28, Federal Reserve Chairman Kevin Warsh expressed concern about high inflation. Despite President Donald Trump's claims that prices under his administration have fallen, Warsh stated that until they are confident that inflation is moving toward their 2% target rate 'clearly and at a sufficient speed,' the Fed has 'work to do.' Warsh said this while noting the latest reading of the central bank's preferred gauge of inflation came in at 3.7% over 12 months.

Immediately after Warsh's remarks, stocks erased daily gains and the probability of an interest rate hike at the Fed's next meeting in mid-September nearly doubled to a 57% chance, according to CME FedWatch. This is in stark contrast to Trump's stance on inflation, who has recently exerted pressure on former Fed Chair Jerome Powell to cut interest rates.

Warsh emphasized that he plans to lead the Fed differently than his predecessors by being more agile in an economic landscape that he described as 'anything but static.' He highlighted ways in which he would limit forward guidance, warning that otherwise it risks creating ambiguity and misleading markets, businesses, and households.