Federal Reserve Chair Kevin Warsh warns of potential rate hike as inflation refuses to cooperate

Kevin Warsh used his first Jackson Hole speech as Fed Chair to deliver a message Wall Street didn’t particularly want to hear: if inflation keeps dragging its feet, interest rates are going back up. Speaking at the annual symposium on August 28, Warsh pointed to persistent price pressures and made clear the central bank isn’t ready to declare victory. PCE inflation, the Fed’s preferred gauge, sat at 3.7% year-over-year as of July. Over the past six months, the annualized reading was even worse at 4.1%. The 2% target? The Fed hasn’t hit it for 65 consecutive months. Markets got the message, fast Before Warsh took the podium, futures markets priced in roughly a 35% chance of a 25-basis-point rate hike at the September 15-16 FOMC meeting. By the time traders digested his remarks, that number had jumped to approximately 60%, according to CME FedWatch data. Warsh has positioned himself as a data-first leader, preferring to let economic readings speak louder than press conferences. But when he did speak, the signal was unmistakable. “Otherwise, we have work to do,” Warsh said, referring to the possibility that inflation trends fail to move decisively toward the 2% goal. The federal funds...