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Kevin Warsh warns rate hikes may be needed if inflation stays above target

Warsh said short-term interest rates are the Fed's predominant tool and told markets the central bank needs clear market signals to set policy.

Reported · Written up by our desk · Central Banks

Federal Reserve Chairman Kevin Warsh said the Fed will have to act if policymakers are not confident underlying inflation is returning to its 2.0% target at a sufficient speed, marking what he described as the closest he has come to acknowledging potential interest rate hikes.

In remarks prepared for delivery to the Fed’s Jackson Hole economic symposium in Wyoming, Warsh noted that financial conditions do not appear restrictive and that the Fed must be confident inflation is moving to its objective to justify keeping policy unchanged.

Warsh also said short-term interest rates are the predominant tool to achieve the Fed’s dual mandate, and he referenced task forces he commissioned to examine longer term issues, adding they will come later and have no bearing on current policy decisions.

According to SCMP Economy, Warsh said the Fed needs clear market signals, as unfiltered as possible, to set proper monetary policy, while not directly addressing recent market interventions by US Treasury Secretary Scott Bessent.

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