Warsh flags possible Fed rate hike as inflation stays above 2%
What's new: Traders lifted the odds of a September hike to 55.7%, while the 2-year Treasury yield rose to 4.31%.
Federal Reserve Chair Kevin Warsh signaled at Jackson Hole that the central bank could raise interest rates if inflation does not cool fast enough, sharpening markets' focus on the Sept. 15-16 policy meeting. Warsh said summer inflation readings were better than expected but did not show a meaningful improvement in underlying price pressures. Consumer prices rose 3.4% in July, while the Fed's preferred personal consumption expenditures measure ran at 3.7%, both above the Fed's 2% target. After the speech, traders increased the implied probability of a September rate hike to 55.7%, according to CME FedWatch, and the 2-year Treasury yield climbed nearly 8 basis points to 4.31%. Warsh also pushed back on using forward guidance, arguing the Fed should keep flexibility before rate decisions.