Warsh Makes A Hawkish Pivot

Useful takeaways from this story.

Traditionally, the annual Jackson Hole Symposium is where the Fed Chair signals which economic forces are shaping the Fed's thinking for the coming year.

Focused on the here and now, Warsh was blunt in his assessment of inflation.

With a few members pushing for rate hikes and inflation making others anxious, the market is taking his speech as more of an indication of what the Fed may or may not do at the next few FOMC meetings, and...

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The useful part

Traditionally, the annual Jackson Hole Symposium is where the Fed Chair signals which economic forces are shaping the Fed's thinking for the coming year. Focused on the here and now, Warsh was blunt in his assessment of inflation. He signaled the Fed may not be done fighting inflation, saying financial conditions didn't look restrictive enough to him and that recent benign inflation readings hadn't convinced him the trend was improving meaningfully.

How it works

While this summer's PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved.
We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed.
For instance, PCE inflation sits at 3.7% year over year, with core measures also elevated.

Details worth keeping

With a few members pushing for rate hikes and inflation making others anxious, the market is taking his speech as more of an indication of what the Fed may or may not do at the next few FOMC meetings, and less about its 2027 outlook.

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