Fed Chair Kevin Warsh used his speech at the Jackson Hole symposium on Friday to open the door to rate increases, without committing to timing. He said underlying inflation has not meaningfully improved.
Markets moved quickly. Futures-implied odds of a hike at the September 15–16 meeting rose to 55.7%, and the two-year Treasury yield climbed nearly 8 basis points to 4.31%.
Why the shift
Six months of war with Iran have pushed energy prices sharply higher, and the Fed held its target range at 3.50%–3.75% through the summer. Warsh, appointed by President Trump, had been expected to lean toward easier policy. Since June he has stressed rebuilding the Fed’s credibility on inflation.
Our read
The question has moved from whether the Fed tightens to when. A strong August jobs report this Friday would likely settle it. For housing, that means mortgage rates, already near 6.7%, carry more risk of rising than falling into the autumn.
Sources
- AP via ABC4, Warsh at Jackson Hole
- Mortgage Professional America, Warsh and rate hikes
- Il Sole 24 Ore, Warsh’s Fed raises rates
- Yardeni Research via MacroMicro
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