Warsh Signals Higher-for-Longer Rates as Inflation Risks Persist
Kevin Warsh stressed that despite improved summer inflation data, underlying inflation trends have not changed meaningfully. The Fed needs confidence that inflation is moving toward its 2% target. He said current financial conditions are hardly restrictive, while noting that the labor market remains stable and household consumption is holding up well. Following his remarks, rate futures priced the probability of a September rate hike at roughly 50-50.
Analysis:Warsh’s tone remains hawkish. His focus on inflation risks and rising rate-hike expectations is viewed as supportive for the dollar and U.S. Treasury yields, while weighing on gold in the short term.
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