Overview
- Kevin Warsh’s Aug. 28 Jackson Hole keynote said underlying inflation remains too high and that the Fed “has work to do,” putting price control back at the center of Fed policy.
- Warsh said short-term interest rates are the Fed’s main tool and refused to offer explicit forward guidance, announcing a data-driven discipline instead of a promise about future moves.
- Markets responded quickly, with traders raising the odds of a September rate increase to roughly the mid-50s to 60% range and two-year Treasury yields rising on the news.
- Some bond investors and commentators expressed skepticism about whether Warsh will follow through with hikes, noting his short time in office and past market doubts about Fed resolve.
- The coming August/September inflation and jobs releases and the Sept. 15–16 FOMC meeting are now the decisive near-term events that will show whether Warsh’s words lead to higher rates.