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Warsh’s Jackson Hole speech boosts odds of a September rate hike

CME Fed Watch put the implied September hike probability at 55.7%, up from 35.4% the prior day.

Reported · Written up by our desk · Central Banks

HousingWire reports Federal Reserve Chair Kevin Warsh used his Jackson Hole speech to argue that inflation progress remains limited and that policy may still need to be more restrictive to restore durable price stability.

Warsh said only modest progress has been made in underlying inflation trends and that the central bank remains responsible for 65 months of sustained elevated inflation. He pointed to the PCE inflation reading of 3.7% year over year and said 54% of individual PCE components have posted price gains above 3% over the past 12 months.

He also said he is watching inflation expectations, noting that market measures can appear stable until they do not. Warsh added that a pickup in commodity prices could be an upside risk to inflation.

Following the speech, market pricing shifted, with the implied probability of a 25 basis point rate hike at the September meeting rising to 55.7% on Friday morning, according to CME Group’s Fed Watch, up from 35.4% the day before.

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