Warsh's Inflation Warning Sparks Rate Hike Speculation
Federal Reserve Chairman Kevin Warsh spoke at the Jackson Hole conference on August 28 and emphasized the need for action to curb inflation. He stated that the US inflation rate has exceeded the target of 2% for 65 months, which should no longer be tolerated.
Analysts note that a rate hike is now more likely, with the possibility of an extreme conflict with President Donald Trump ahead of the November midterm elections. The New York Times reported on August 29 that a rate hike next month would support Warsh's willingness to curb inflation but would also lead to an immediate confrontation with the Trump administration.
The two-year Treasury bond interest rate surged by 0.11 percentage points after Warsh's speech, reflecting the possibility of a rate hike. The interest rates on 10-year and 30-year Treasury bonds fell and rebounded, rising by 0.04 and 0.01 percentage points, respectively.
Aditya Bab, head of economic research at Bank of America, stated that unless employment and price indicators are very weak in August, the responsibility for raising interest rates in September rests with Warsh. Alberto Mussalem, president of the Federal Reserve Bank of St. Louis, pointed out that delaying action despite the data could affect expected inflation.