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Warsh says inflation remains too high as Fed and Treasury diverge
Kansas City Fed Chairman Kevin Warsh said unemployment at 4.1% is consistent with full employment, while inflation has missed the Fed’s 2% target for 65 straight months.
Investors looking to the Fed for signals on inflation and the path for rates got a stark message from Kansas City Federal Reserve Chairman Kevin Warsh at the Jackson Hole Symposium on August 27 to 29. Warsh said inflation is still too high and that the Fed has missed its target for 65 consecutive months, even as he characterized the employment side of the central bank’s dual mandate as stable.
Warsh linked the Fed’s focus to upcoming economic data before the Federal Open Market Committee’s September 16 meeting, with the August CPI report on September 11 potentially having outsized influence. He noted that while inflation has slowed recently, he does not believe the underlying trend has improved materially.
The push and pull between monetary and fiscal policy also came into focus. Warsh argued the Fed must address elevated inflation, while the article highlights that the US Treasury, led by former activist investor Scott Bessent, has announced plans to buy long maturity bonds, described as a form of quantitative easing aimed at containing bond yields.
The article further points to expected CPI dynamics ahead of the meeting, including a forecast for headline CPI to rise 0.4% month over month, driven by gas price spikes tied to the lingering Iran war, while core CPI (excluding food and energy) is expected to hold at 0.2% month over month.