Warsh flags sticky inflation, lifting odds of a September Fed hike

Federal Reserve Chair Kevin Warsh signaled at Jackson Hole that the central bank may still need to raise interest rates if inflation does not cool fast enough, prompting investors to increase bets on a September hike. Warsh said recent summer readings were better than expected but did not show that underlying price trends had “meaningfully improved.” Consumer prices rose 3.4% in the year through July, while the Fed’s preferred inflation gauge ran at 3.7%, both above the central bank’s 2% target. After the speech in Wyoming, markets lifted the implied probability of a September rate increase above 50%, according to CME data, and the 2-year Treasury yield rose to 4.31%. Warsh also argued for a “quieter Fed” with less forward guidance.