Warsh flags possible Fed rate hike as 2-year Treasury yield climbs

Federal Reserve Chair Kevin Warsh signaled at Jackson Hole on Friday that stubborn inflation could require higher interest rates, giving markets his clearest hawkish message since taking over in May. Warsh said inflation remained above the Fed’s 2% target even after some recent cooling, and pointed to broad price pressures within the personal consumption expenditures index. Markets took the speech as a stronger case for more tightening: the two-year Treasury yield rose to about 4.30%, while traders priced a 33.7% chance of a September rate increase and a 74.2% chance by December. Gold, which tends to struggle when rates rise, slipped 0.5% to $4,580.19 an ounce.