U.S. Federal Reserve Chairman Kevin Warsh takes a break in the rain with Bank of Canada Governor Tiff Macklem and Bank of England Governor Andrew Bailey during the Kansas City Fed’s annual economic symposium, in Jackson Hole, Wyoming, U.S., August 28, 2026.
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ANN SAPHIR
Federal Reserve Chairman Kevin Warsh warned inflation isn’t meaningfully slowing and said policymakers must be confident that it is, otherwise the central bank has “work to do.”
In a sweeping speech, his first since becoming chairman of the central bank in May, Warsh reiterated that policymakers will return inflation to their 2% goal, which he said is a firm and fixed target.
“Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That’s our job,” Warsh said at the Fed’s annual conference in Jackson Hole, Wyoming, on Friday.
Warsh added that financial conditions are not currently restrictive and interest rates are the Fed’s “predominant tool” for achieving its mandate, though he stopped short of signaling he would support an interest-rate hike when Fed officials gather in September.
“I stand here today committed to a discipline, not to a decision,” he said.
Yields for two-year Treasuries rose by as much as nine basis points to 4.32%, while 30-year yields slipped two basis points to 5.17% — moves that signal an expectation that the Fed may need to raise short-term rates. The implied probability of a rate hike in September rose to above 50%, up from around 36% before the speech, based on federal funds futures.
“Chairman Warsh gave the markets what they wanted, which was more detail on his views about the current data, particularly inflation,” said Omair Sharif, president of Inflation Insights LLC. “Of course he did not tip his hand as to any future policy actions. In that sense, this seems like a win-win for Warsh and the markets.”
Warsh went on to say that, with inflation running above 2%, the Fed’s predominant focus was now on prices. And he made clear that recent data was not entirely encouraging.
“While this summer’s PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved,” Warsh said. “Market prices show confidence that we will deliver price stability. And I can assure you, they’re right.”
The Fed is due to receive consumer price data for August on Sept. 11, a report that could prove decisive at their next meeting on Sept. 15-16.
Richard Clarida, a former Fed vice chair, told Bloomberg Television that every Fed meeting is now “live,” meaning a rate move is possible.
If Fed officials don’t see improvement in inflation, he added, “They’re prepared to hike.”
Warsh’s highly anticipated remarks came amid criticism of his pared-back communications strategy that economists and market participants said lacks clarity on the near-term outlook for the economy and monetary policy. His remarks appeared to address those concerns, going further than he has before in providing his views on the economy and the Fed’s policy priorities under his leadership.
“Let’s be equally clear about another aspect of the objective: Price stability is not self-executing, nor is inflation necessarily mean-reverting. It is the Fed’s job to deliver stable prices,” he said.
Source: Read the original article on www.thehindubusinessline.com
