Warsh's Hawkish Warning Sparks Global Market Rally

Federal Reserve Chairman Kevin Warsh's inflation warning sent shockwaves through global markets on Friday, lifting European and US stocks while pushing the dollar to new highs.

The FTSE 100 index rose 31.72 points, or 0.3%, to close at 10,824.26, as investors processed Warsh's hawkish remarks in his first major speech since taking the chair position in May.

'Inflation is not meaningfully slowing,' Warsh warned, reiterating the central bank's commitment to its 2% target and signaling a readiness to tighten monetary policy further if necessary.

Certainly, investors seem to be pricing in rate hikes. Pantheon Macroeconomics' Samuel Tombs noted that Chair Warsh's speech spurred investors to price in 53bp of policy tightening over the next 12 months, up from 45bp beforehand.