Warsh's Jackson Hole Speech Seen as Pivotal Test for Fed Credibility

Investors are urging Federal Reserve Chairman Kevin Warsh to use his Jackson Hole speech as an opportunity to clearly condemn high inflation, which has been above the Fed's 2% target for five years. A clear commitment to price stability could trigger buying of 30-year US government bonds and bring down yields that last week hit their highest level since 2007.

Warsh's speech is seen as a pivotal test for the Chairman, whose evasive communication style has raised doubts about his central bank's dedication to controlling inflation. The Fed watchers at JPMorgan Chase & Co., Apollo Global Management Inc., and Morgan Stanley say that if Warsh can convince the market of his commitment to managing inflation, 'some of the angst on Fed credibility will reduce.'

US 30-year Treasury yields have been above the key 5% level for two months, despite interventions by Treasury Secretary Scott Bessent, including a plan to buy back long bonds. Market participants will scrutinize every word from Warsh at the Fed's annual gathering in Wyoming.