Overview
- Warsh set the new standard on Aug. 28 at the Jackson Hole symposium by saying the Fed must see underlying inflation move to 2% “clearly and at sufficient speed.”
- July PCE inflation, the Fed’s preferred gauge, stood at about 3.7% year‑over‑year with a six‑month annualized pace near 4.1%, showing price gains remain well above the 2% goal.
- Futures traders sharply repriced expectations after the speech with the CME FedWatch probability of a 25‑basis‑point hike at the Sept. 15–16 FOMC meeting rising from roughly the mid‑30s percent to about 60 percent.
- Since taking the chair in May, Warsh has removed conventional forward guidance, created policy task forces, and said the Fed will lean on short‑term rates and incoming data to judge policy moves.
- The shift tightens the Fed’s tolerance for slow disinflation, heightens near‑term risk to rate‑sensitive markets, and sets the Sept. FOMC meeting as the key test of whether rhetoric turns into a fresh increase in borrowing costs.