The Fed’s inflation threshold has hardened:
At Jackson Hole, Chair Kevin Warsh put 12-month PCE inflation at 3.7% and its six-month pace at 4.1%. Both sit above the Fed’s fixed 2% target.
PCE is the Fed’s preferred inflation gauge. July’s official release also put headline PCE at 3.7% year over year and core PCE at 3.3%.
By comparison, the unemployment rate is 4.1%, low by historical standards, while private domestic final purchases are running at a nearly +3% pace in 2026. Warsh said broad financial conditions are hard to describe as restrictive.
The catalyst is persistence: Warsh counted 65 months of elevated inflation and said the Fed must see underlying inflation moving to target clearly and at sufficient speed. Otherwise, “we have work to do.”
The Fed’s inflation hurdle has hardened.
Sources: Federal Reserve, U.S. Bureau of Economic Analysis
Board of Governors of the Federal Reserve System
In Our Time
Thank you. It's great to be here again and to see so many familiar faces. I've been looking forward to this weekend—what better place to mark my 100th day as Chairman?
1August 30, 2026 73
