Federal Reserve Chair Warsh's First Press Conferences Leave Markets Uncertain Amid Influx
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Warsh's first pair of press conferences as Fed chairman left many in the markets uncertain about where he stood on the path of interest rates, prompting bond traders to sell off long-term debt to account for the uncertainty. At a closely watched speech in Jackson Hole, Wyoming on Friday, Warsh showed he had heard those critics. He came as close as he is ever likely to do to indicating he is on the precipice of raising interest rates if inflation doesn't improve, based on his own idiosyncratic reading of price data.
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New York Post BusinessFederal Reserve Chair Kevin Warsh said Friday there may be “work to do” on inflation, though he again danced around his outlook on interest rates during a closely-watched speech at the central bank’s annual Jackson Hole, Wyo., retreat.
FortuneComments from the new Fed chair appeared to reassure Wall Street that fighting inflation remains the priority for the central bank. Warsh did not imply that a rate hike is imminent, but he appeared to dismiss perceptions that inflation is no longer a threat.
Financial TimesWarsh says Fed will have ‘work to do’ if inflation does not fall soon Central bank chair signals rising concerns over persistently elevated price increases
BloombergWarsh Says Fed Must Act if Inflation Stays High Federal Reserve Chair Kevin Warsh signaled the central bank is prepared to act if inflation fails to move clearly and quickly toward its 2% target, while describing the broader US economy as strong. On Bloomberg This Weekend Schwab Center Head of Macro Research & Strategy Kevin Gordon and Allsprings Global Investments Head of Equity Investments Ann Miletti say the remarks provided greater clarity on the Fed’s approach, with upcoming inflation data likely to be critical to whether policymakers raise rates in September. (Source: Bloomberg)
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“Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” Warsh said. “Otherwise, we have work to do. That’s our job … our mandate … and our charge to keep.”
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Fortune“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” Warsh said. “Otherwise, we have work to do.”
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Inflation cooled in June and July after spiking in May from soaring gas prices, yet it remains above the central bank’s target. According to the Fed’s preferred measure, it was 3.7% in July.
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New York Post BusinessIn July, inflation hit 3.4% – down from levels above 4% in May but still stubbornly above the Fed’s 2% goal.
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Wall Street investors now see the chances of a rate hike at the Fed’s Sept. 15-16 meeting as basically a coin flip, according to futures pricing tracked by CME FedWatch, up from about one-third before Warsh spoke.
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New York Post BusinessAhead of Warsh’s speech, traders saw 35% odds that the Fed issues a quarter-point rate hike at its September 16 meeting, according to CME FedWatch.
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01 Fortune The U.S. stock market held steady after the speech, but expectations are building in the bond market for the Fed to hike interest rates. The yield on the two-year Treasury, which closely tracks expectations for what the Fed will do with its federal funds rate, moved from 4.22% to 4.30%, a sign that investors expect short-term yields to move higher.
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02 CNBC Warsh at Jackson Hole gave a more hawkish reading of the economy than he had in July. He said elevated prices needed to be the Fed's main focus and described financial conditions as not being broadly restrictive, a change from his July press conference, when he said they were uneven. He did that while swiping back at his critics and insisting his policy of deliberate ambiguity about Fed policy is here to stay.
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03 New York Post Business Warsh said the “good news” is that inflation estimates in the medium-term “look stable” – but he added that this summer’s inflation readings “do not tell me that underlying trends have meaningfully improved.”
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