Warsh's Silence on Inflation Leaves Markets Guessing at Jackson Hole

Federal Reserve Chairman Kevin Warsh is heading to this week's Jackson Hole conference without giving investors and his colleagues what they want most: a clear signal on whether he believes current inflation is a passing shock or a sign of an overheating economy.

The distinction matters because it determines whether the Fed raises rates further. Three officials voted last month to raise rates, the most dissents in a decade, and others have signaled openness to joining them.

Warsh has not indicated where he stands on this issue, part of what the Wall Street Journal described as his deliberate policy of saying less. He has argued for years that central bankers talk too much, issuing forecasts that end up hardening into commitments they later have to defend or unwind.

The result is that both investors and fellow policymakers are effectively waiting on him to show his hand before the debate can move forward. Softer inflation readings over the past two months have taken some pressure off the Fed to raise rates at its September meeting, but they have not settled the underlying question of whether policy is restrictive enough.

Bond markets appear to be drawing their own conclusions in the absence of clear guidance. After Warsh's July press conference, short-term yields fell even as the 30-year Treasury yield climbed to its highest level since 2007, with the 30-year mortgage rate rising to around 6.75%, the highest so far this year.