Warsh's Hawkish Rhetoric Sparks Rate Hike Expectations

Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole Symposium has caused markets to shift in favor of a rate hike, according to traders and analysts. His remarks were seen as a sign that interest rates will soon rise, with bond yields jumping over 13 basis points after the speech.

Warsh stated that inflation is too high and it's up to the Fed to fix it, which was taken as a signal by markets that a discussion about a policy rate hike is clearly on the table for the September meeting. The odds of a September rate hike went from slightly more than 35% before the speech to 57% after.

However, not all analysts agree that Warsh's remarks will result in tighter monetary policy. Some experts believe markets are overestimating the likelihood of a rate hike in two weeks and reading too much into a speech that largely rehashes points raised during last month's Federal Open Market Committee meeting.