Warsh's Conventional Approach Leaves Economists Underwhelmed

At the Jackson Hole conference, Federal Reserve Chairman Kevin Warsh delivered a speech that left economist Paul Krugman unimpressed.

Krugman described Warsh's remarks as 'utterly conventional,' suggesting that the new Fed chairman offered little indication of a significant departure from traditional monetary policy under his leadership.

Warsh had previously hinted at wanting to change the way the Fed communicates with markets, but his speech at Jackson Hole indicated otherwise. He reaffirmed the Fed's 2% inflation target and stuck with the Personal Consumption Expenditures Index as the preferred gauge of inflation.

The probability of a September rate hike climbed to roughly 55%, up from around one-third the previous day, following Warsh's speech. Krugman characterized Warsh's message as 'tight money until we see a lot better data.'