Overview
- Federal Reserve Chair Kevin Warsh said Friday that the Fed “has work to do” if underlying inflation does not move clearly and quickly toward the 2% PCE target.
- He reaffirmed the Fed’s 2% price-stability goal and said short-term interest rates are the central bank’s main tool while continuing to oppose formal forward guidance.
- Investors sharply repriced policy expectations after the speech, lifting the probability of a September quarter-point hike to roughly the mid‑50s percent range and sending two-year Treasury yields and the dollar higher.
- Warsh gave no timetable for rate moves and left the near-term path conditional on upcoming jobs and inflation reports plus the Sept. 15–16 FOMC meeting and internal Fed reviews.
- The speech comes as PCE inflation runs about 3.7% and energy-price shocks from the Iran war, large budget deficits and Treasury buybacks raise the risk that higher borrowing costs will pressure mortgages and other consumer rates.