Warsh's Hawkish Speech Triggers Global Market Turmoil

Fed Chair Kevin Warsh's hawkish speech at the Jackson Hole symposium on Friday sent shockwaves through global markets. In his remarks, Warsh declared that inflation is not slowing and that interest rates are the 'predominant tool' for the Fed to achieve its mandate.

The US Treasury yield curve bear flattened in reaction to Warsh's speech, with yields easing slightly in early Monday trading in Asia but still significantly higher than before. The benchmark two-year yield rose seven basis points to trade near the top of the range since late 2024, as the odds of a September 16 FOMC rate hike rose above 50%.

The US dollar rose sharply on Warsh's hawkish speech, with USDJPY trading through 160.00 Friday and briefly in early Monday trading.