Warsh strikes hawkish tone at Jackson Hole

Fed Chair Kevin Warsh delivered his speech, titled “In Our Time,” at the Federal Reserve Bank of Kansas City’s Jackson Hole Economic Symposium, emphasizing that the U.S. economy remains resilient and the labor market is close to full employment, but inflation continues to show insufficient progress.

Warsh acknowledged that recent inflation readings have been better than expected, but said they do not necessarily indicate a meaningful improvement in underlying price pressures. He highlighted that 49% of goods and services in the PCE price basket have recorded inflation above 3% over the past six months, significantly higher than the pre-pandemic average.

Warsh also appeared to clarify some of the language used during the July FOMC meeting, reiterating the Fed’s commitment to its 2% PCE inflation target. He stressed the importance of monitoring underlying inflation measures, including price-distribution data, to assess whether inflation is genuinely cooling.

There was little new information on the Fed’s five task forces, although Warsh said he was encouraged by the progress made so far.

Warsh stopped short of providing explicit guidance on future interest rates, his comments suggested the Fed remains concerned about persistent inflation. With another CPI report due before the next FOMC meeting, the upcoming data could play a decisive role in determining policy, particularly if inflation comes in hotter than expected.