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Kevin Warsh Refuses to Signal October Federal Reserve Interest Rate Decision

Warsh reiterated that he does not believe in announcing policy decisions before Federal Reserve meetings, arguing that financial markets should assess incoming economic data rather than depend on advance guidance from policymakers.

“I don’t prejudge meetings. I don’t believe in saying now what I might do at the meetings that we have in the balance of this year,” Warsh said.

He acknowledged that his position could disappoint investors looking for clues ahead of the Fed’s next meeting later this month. However, he indicated that the central bank is taking a different approach to communicating its policy outlook.

“It’s a new chapter at the Fed [and] we’re not in that business anymore. But we can go in any direction you’d like,” he said.

His remarks leave investors without a clear indication of whether the Federal Reserve will raise interest rates, keep them unchanged or consider another policy adjustment at its upcoming meeting.

Global Central Banks Face Synchronous Monetary Tightening

Warsh also pointed to a broad shift towards tighter monetary policy across major economies, describing inflation control as a challenge shared by central banks worldwide.

Although individual central banks operate under different mandates and make independent policy decisions, their efforts to address rising prices are increasingly moving in the same direction.

Warsh described the trend as “a synchronous tightening in monetary policy in most places around the world,” adding that “there’s no free riders.”

The comments underline how inflation has become a shared concern for policymakers as higher energy costs, geopolitical tensions and strong investment demand put pressure on prices and borrowing costs.

The global economic outlook is also complicated by rising public debt. Global public debt is projected to exceed 100% of worldwide gross domestic product (GDP), a threshold last reached in the aftermath of World War II.

The United States government has argued that stronger economic growth would help manage its rising debt burden. However, the IMF has warned against relying on economic growth alone to resolve the country’s fiscal challenges.

Energy Costs and AI Investment Add to Global Inflation Pressures

Rising energy prices linked to the Iran war, combined with the investment boom in artificial intelligence, are adding to inflationary pressures and increasing borrowing costs across the global economy.

These developments present a challenge for central banks, which must control inflation without unnecessarily weakening economic growth. Higher interest rates can help contain price pressures, but they can also increase borrowing costs for households, businesses and governments.

The situation is particularly complicated by the growing burden of public debt. With global debt approaching levels not seen since the aftermath of World War II, policymakers face increasing pressure to maintain economic stability while managing financing costs.

The US government has maintained that strong economic growth can help reduce the strain of rising debt. However, the IMF has cautioned that growth alone may not be sufficient to address the country’s fiscal challenges.

Kevin Warsh Optimistic About AI but Warns of a Difficult Transition

Alongside his concerns about inflation and monetary policy, Warsh expressed optimism about the long-term economic potential of artificial intelligence.

He believes economies that successfully integrate AI could experience higher productivity and greater wealth creation. However, he cautioned that the transition may be uneven and that the technology’s near-term impact on employment remains uncertain.

“I want you to hear from me optimism, but optimism leavened by the seriousness of purpose,” Warsh said.

Warsh suggested that the significance of the current technological transformation would become clearer over time. He expects AI to have a lasting influence on the global economic landscape.

A decade from now, he said, people will look back on the developments and “say this was hugely consequential.”

His remarks highlight the balance between recognising AI’s potential to improve productivity and preparing for possible disruptions to employment and business activity. The pace at which companies adopt AI and translate technological advances into measurable productivity gains will remain an important factor in assessing its economic impact.

Stock Market Reaction to Kevin Warsh’s Remarks

Financial markets showed a relatively measured response following Warsh’s comments in Bangkok.

S&P 500 and Nasdaq futures edged higher after the speech, while Asian stock market indexes and US Treasury yields remained largely stable.

Warsh’s refusal to provide advance guidance meant investors received no fresh confirmation about the Federal Reserve’s next interest-rate move. Market participants will continue to assess economic releases, inflation trends and employment figures to determine the likely direction of US monetary policy.

The absence of a clear signal also reinforces the importance of upcoming economic data in shaping expectations for the remainder of the year.

Fed Rate Outlook: September Hike and October Meeting in Focus

The Federal Reserve raised its benchmark interest rate to a range of 3.75% to 4% last month, marking its first rate increase since 2023.

According to CME FedWatch data cited in the report, traders see a 72.3% probability that the Fed will leave interest rates unchanged at its October 27–28 meeting. Meanwhile, most market participants expect a 25-basis-point rate increase at the December meeting.

These expectations reflect continued uncertainty over inflation, energy prices, economic growth and the consequences of the global investment boom in AI.

However, market probabilities are not official Federal Reserve decisions and can change as new economic information becomes available.

Warsh’s latest remarks suggest that investors should not expect advance assurances about the Fed’s next move. Instead, the direction of monetary policy will depend on how economic conditions develop and how policymakers evaluate the balance between inflation risks and growth prospects.

What Lies Ahead for the Global Economy and Fed Policy?

Warsh’s comments highlight two major considerations for the economic outlook: the potential for AI-driven productivity growth and the continuing challenge of controlling inflation.

While stronger investment could support long-term growth, uncertainty over employment and the near-term effects of AI means the transition may be uneven. At the same time, persistent price pressures could complicate the Federal Reserve’s decisions on interest rates.

For now, Warsh has avoided signalling the outcome of the next policy meeting. Investors and businesses will be watching incoming economic data and further central bank commentary to assess the outlook for inflation, employment, economic growth and US monetary policy.

FAQ’s

1. What did Kevin Warsh say about AI’s impact on the global economy?

Warsh said AI could become one of the most consequential economic changes of his lifetime, potentially boosting productivity and wealth. However, he cautioned that the transition could be uneven and its near-term employment effects remain uncertain.

2. Why does Kevin Warsh believe AI could create uncertainty in the job market?

AI is expected to change how businesses operate and how demand and supply evolve. Warsh said its impact on employment over the next 12 to 18 months remains unclear as companies and workers adapt to the technology.

3. What concerns did Warsh highlight about inflation and global investment?

Warsh described the investment surge as a major positive development for the global economy but noted that rising prices remain a concern among central bankers. Policymakers must balance the benefits of economic growth with the need to maintain price stability.

4. Did Kevin Warsh indicate the Federal Reserve’s next interest-rate decision?

No. Warsh declined to prejudge upcoming policy meetings or announce his position in advance. He reiterated the Federal Reserve’s commitment to price stability but provided no clear signal about its next interest-rate decision.

5. How could artificial intelligence influence future monetary policy decisions?

AI could increase productivity and expand economic output over time, but its effects on employment, demand, supply and inflation remain uncertain. The Federal Reserve will need to assess these developments alongside economic growth and price data when making policy decisions.

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However, the minutes did not provide a clear indication of when policymakers would make their next move. Officials highlighted that persistently elevated prices and a relatively stable labor market could justify another increase in the federal funds rate.

The Federal Reserve is scheduled to announce its next interest rate decision on October 28, followed by another policy meeting on December 9.

Fed Officials Expect Another Rate Increase

According to the meeting minutes, a majority of policymakers believe another rate increase could be appropriate before the end of 2026.

“With regard to the outlook for monetary policy beyond the current meeting, most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” the document stated.

At the same time, Fed officials stressed that future decisions will depend heavily on incoming economic data and changing risks.

“Participants emphasized, however, that they approached each meeting with an open mind and decisions at future meetings would depend on incoming information and its implications for the outlook and the balance of risks,” the minutes said.

October Rate Hike Looks Less Certain

Following the September 16 policy meeting, markets initially increased expectations that the Federal Reserve could raise interest rates again at its late-October meeting.

However, more recent inflation data and comments from several senior Fed officials have reduced expectations for an immediate October increase.

The Fed’s preferred inflation measure, the Personal Consumption Expenditures (PCE) Price Index, showed core inflation at 3% in August, while headline inflation stood at 3.4%. Both measures remained well above the Fed’s 2% inflation target, although the readings came in below market expectations.

Fed Remains Concerned About Sticky Inflation

The September meeting discussion showed that policymakers continue to see risks that inflation could remain elevated for longer than expected.

At the same time, officials described the labor market as being “close to maximum employment”, while overall economic growth had strengthened.

The decision to increase the benchmark federal funds rate by 25 basis points was unanimous, despite earlier indications that some key policymakers had been hesitant to support another hike.

“Many participants emphasized that a higher path for the target range would be prudent on risk-management grounds, providing insurance against inflation remaining persistently above target due to stronger-than-expected demand or further adverse supply shocks,” the summary said.

Majority of Fed Officials See One More Hike

The latest projections from the Federal Open Market Committee point toward one additional rate increase this year, followed by no further hikes in 2027.

Of the 18 FOMC officials who submitted their forecasts, 16 expected another rate increase.

Fed Chairman Kevin Warsh has not submitted a forecast since taking the position in May. During his post-meeting news conference, Warsh described the rate increase as removing “a dose of accommodation” from monetary policy.

That comment prompted Wall Street analysts to consider whether additional rate increases could follow.

However, several other Fed officials have subsequently indicated that the central bank does not need to move quickly, while recent inflation data has shown some improvement despite a notable rise in short-term inflation expectations.

Inflation Expectations Remain Elevated

Market-based inflation indicators continue to point toward persistent price pressures.

A new survey released Wednesday by the Federal Reserve Bank of New York showed that consumers’ expectations for rising prices over the next year had climbed to their highest level since May 2023.

The development adds another layer of uncertainty for policymakers as they assess whether inflation is moving sustainably toward the Fed’s 2% target.

Treasury Yields Reach Highest Levels Since 2002

U.S. Treasury yields have also climbed sharply, reaching levels not seen since 2002.

Fed officials discussed the rise in Treasury yields during their meeting and attributed the move to expectations of higher Federal Reserve rates, strong economic growth and continued investment related to artificial intelligence.

Staff economists also suggested that some of the increase could be linked to “uncertainty related to the U.S. Treasury’s announcement and implementation of the buyback program.“

U.S. Treasury Secretary Scott Bessent announced in August that the department would increase its buybacks of previously issued long-term debt.

However, the program has so far had limited influence on Treasury yields, which remain close to their highest levels in more than two decades.

What the Fed Minutes Mean for Gold and Silver

The possibility of another Federal Reserve rate hike remains an important factor for precious metals markets. Higher interest rates and elevated Treasury yields can increase the opportunity cost of holding non-yielding assets such as gold.

At the same time, uncertainty surrounding inflation, economic growth and monetary policy can continue to support demand for safe-haven assets.

For gold and silver traders, upcoming U.S. economic data and comments from Federal Reserve officials will therefore remain important signals for determining the direction of precious metals prices.

FAQ’s

1. Why is the Federal Reserve considering another interest rate hike?
The Federal Reserve is considering another rate increase because inflation remains above its 2% target. Officials are also monitoring economic growth, labor-market conditions and the risk that stronger demand or supply shocks could keep inflation elevated for longer.

2. What is the Fed’s inflation target?
The Federal Reserve’s long-term inflation target is 2%. Policymakers monitor inflation indicators such as the Personal Consumption Expenditures Price Index to assess whether price growth is moving toward that target on a sustainable basis.

3. How can higher interest rates affect the U.S. economy?
Higher interest rates generally increase borrowing costs for households and businesses. This can reduce spending and investment, potentially slowing economic activity. At the same time, higher rates can help moderate demand and ease inflationary pressures over time.

4. Why are Treasury yields important for financial markets?
Treasury yields influence borrowing costs and the valuation of various financial assets. Rising yields can make interest-bearing investments more attractive and may put pressure on assets that do not generate regular income. They also reflect changing expectations about inflation, economic growth and Federal Reserve policy.

5. Why are upcoming economic data important for the Fed’s next decision?
Economic indicators provide policymakers with fresh information about inflation, employment, consumer demand and overall economic activity. The Federal Reserve has emphasized that future policy decisions will depend on incoming data and how it changes the outlook for inflation and economic growth.

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The latest move marks the first Fed rate increase since 2023 and comes amid continued concerns over inflation and higher energy prices. The central bank also indicated that another rate increase could be possible, keeping markets focused on the future path of US monetary policy.

Fed Raises Rates by 25 Basis Points

The Federal Open Market Committee voted unanimously to increase the federal funds target range by 25 basis points, taking it to 3.75%–4%.

The Federal Reserve said economic activity was expanding at a solid pace, while inflation remained elevated. The central bank said the latest policy action was aimed at supporting a more timely return of inflation to its 2% target.

The decision comes as policymakers assess the impact of higher energy costs and other price pressures on the US economy.

Warsh Says Inflation Is Still Too High

Speaking after the policy meeting, Federal Reserve Chairman Kevin Warsh said inflation remains a major concern for policymakers and emphasized the importance of price stability.

“Our predominant focus is on the price stability side of our mandate,” he said. “The plain fact is that inflation is too high and has been for too long.”

The comments underline the Fed’s continued focus on controlling inflation even as officials assess economic growth and employment conditions.

Price Stability Remains a Key Fed Priority

Warsh also emphasized that stable prices are important for long-term economic growth.

“Price stability is foundational to economic growth, and I think we took an important step today to deliver it. We did it in part by removing the dose of accommodation that I mentioned before,” Warsh said.

The Fed’s latest economic projections show median PCE inflation at 3.7% for 2026, with the projection declining to 2.3% in 2027 and 2.1% in 2028.

Fed Says It Cannot Directly Control Individual Prices

Warsh acknowledged that monetary policy cannot directly determine the price of individual products such as oil or groceries. However, he said the central bank can work to prevent temporary price shocks from spreading across the wider economy.

“We cannot affect any individual price,” Warsh said, citing oil and groceries as two examples.

“But what we can do and will do is ensure that any change in relative prices don’t broaden out, don’t have second and third order effects on the economy,” he said. “That’s what we’re tasked to do, and that’s what we do.”

His comments came as energy prices have remained a significant source of inflation concerns.

Another Rate Hike Could Come in 2026

The Fed’s latest projections point to the possibility of another rate increase before the end of 2026. The median federal funds rate projection for the end of 2026 stands at 3.9%, compared with 3.4% in the June projections.

This means upcoming inflation, employment and economic-growth data will remain important for determining the timing and direction of future policy decisions.

Warsh Declines to Give Forward Guidance

Warsh said he would not provide specific details about the Fed’s future interest-rate decisions.

“I’m not in the forward guidance business,” he told reporters. “The decision we made today was a sober decision, serious decision, responsible decision, one that we have been preparing for and thinking about in my 110 or [120] days here.”

He also said the decision was based on the Fed’s assessment of economic conditions rather than market expectations.

“We made this decision today based on our assessment of the situation, based on our assessment of the trajectory for employment, based on our judgment on the strength of the economy, sometimes the market tries to prejudge our outcomes. I’ll observe market prices and see what they have to say. But today was our decision,” Warsh said.

White House Criticizes Fed Rate Hike

The White House criticized the Federal Reserve’s decision to raise interest rates, arguing that higher borrowing costs would not directly address inflation caused by energy-market pressures.

White House spokesman Kush Desai said the rate increase was not economically justified from the administration’s perspective.

“Today’s rather unfortunate decision by the Federal Reserve to hike interest rates was not, from the administration’s point of view, backed by a particularly compelling economic case,” Desai said in a Fox News interview.

Desai attributed current inflation pressures largely to energy supply issues and developments in the Middle East.

“To the extent that we still do have inflation, as the president and others have noted, it’s entirely driven by an energy supply shock, by what’s going on with oil prices in the Middle East,” Desai said. “These are things that have nothing to do with with interest rates and are not affected really by higher interest rates.”

He also said higher borrowing costs could weigh on economic activity.

“All higher interest rates are going to do right now is stymie the significant economic progress that the United States has made under this president.”

Desai said he had not personally spoken with Trump about the Fed’s decision.

What the Fed Decision Means for Gold and Silver

The latest Fed decision could remain an important driver for gold and silver prices. Higher US interest rates can influence the dollar and Treasury yields, while also increasing the opportunity cost of holding non-yielding assets such as gold.

At the same time, elevated inflation, geopolitical uncertainty and energy-market volatility can continue to influence safe-haven demand for precious metals.

The Fed’s economic projections show that inflation is expected to remain above the central bank’s 2% target in 2026 before moving closer to that level in subsequent years.

For bullion markets, investors will therefore continue to track the US Dollar Index, Treasury yields, crude oil prices, inflation data and further comments from Federal Reserve officials.

What Investors Should Watch Next

Following the September policy decision, attention will shift toward incoming economic data and signals from Federal Reserve officials. Inflation and employment reports will be particularly important in assessing whether policymakers maintain the current policy stance or consider another adjustment.

The Fed’s September projections also show that policymakers expect the federal funds rate to remain relatively elevated, although projections vary considerably among individual officials.

Markets will also continue to monitor developments in energy prices and geopolitical conditions, as these factors can influence inflation expectations and the broader economic outlook.

FAQ’s

1. Why did the Federal Reserve raise interest rates in September 2026?

The Federal Reserve raised its benchmark interest rate by 25 basis points to 3.75%–4% as inflation remained elevated. The FOMC approved the decision unanimously in a 12–0 vote, with the central bank saying the action would support a more timely return to its 2% inflation target.

2. What did Fed Chairman Kevin Warsh say about inflation?

Kevin Warsh said inflation remains too high and has stayed elevated for too long. He emphasized that price stability is a central priority for the Federal Reserve and said the latest policy action was intended to help prevent price shocks from creating broader inflationary effects.

3. Could the Fed raise interest rates again in 2026?

The Federal Reserve’s September economic projections indicate that another rate increase could be possible before the end of 2026. The median federal funds rate projection for the end of the year is 3.9%, although individual policymakers have different views about the appropriate policy path.

4. How could the Fed rate hike affect gold and silver prices?

Higher interest rates can support the US dollar and increase Treasury yields, potentially creating pressure on non-yielding assets such as gold and silver. However, persistent inflation, geopolitical uncertainty and energy-market volatility can also support safe-haven demand for precious metals.

5. What factors should investors watch after the latest Fed decision?

Investors should monitor upcoming US inflation and employment data, Treasury yields, the US Dollar Index, energy prices and comments from Federal Reserve officials. The Fed’s economic projections and future policy guidance will also remain important for understanding the potential direction of interest rates and financial markets.

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Speaking at the Jackson Hole gathering in Wyoming on Friday, Warsh said inflation remains above the Federal Reserve’s 2% target, placing greater emphasis on price stability even as several parts of the economy continue to show strength. The latest data cited in his remarks showed the Federal Reserve’s preferred PCE inflation measure at 3.7% over 12 months, while the six-month measure stood at 4.1%.

Warsh also questioned the usefulness of extensive forward guidance, arguing that policymakers should retain flexibility as economic conditions change. He said the Federal Reserve should rely on relevant economic data and trends rather than make quasi-commitments about future interest-rate decisions.

At the same time, the Fed chief highlighted the potential economic impact of artificial intelligence, saying rapid AI investment could have significant implications for productivity, capital formation, employment and the future conduct of monetary policy.

Warsh’s assessment of the economy was broadly positive. He pointed to strong capital expenditure, rising corporate profits, healthy consumer spending, stable labour markets and supportive credit conditions. However, he stressed that inflation remains too high and that the Federal Reserve’s predominant focus should currently be on prices.

Kevin Warsh Full Jackson Hole Speech

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?

For the fine hospitality, everyone here is in debt to President Jeff Schmid and his colleagues at the Federal Reserve Bank of Kansas City. Jeff, our thanks to you all.

Jeff and the other planners have some recreation options lined up for later today. And I’d advise you to be very careful with your choices.

As I learned years ago, you can take two different kinds of hikes on the trails around Jackson Hole. I can sum up my hikes with former Vice Chairman Don Kohn in two words: I survived. These steely marathon death marches revealed a side of Don I wasn’t ready for.

There’s another kind of hike—one I associate with Chairman Ben Bernanke, my old colleague. With Ben, it’s a much more leisurely pace, an easy stroll along the wandering trails at the Rockefeller Preserve.

So before setting out, do a wellness check and ask yourself: “Is this a Kohn day or a Bernanke day?”

The best thing about this gathering is that it helps us all clear our minds and think straight about our world and our time. For me, it feels like the right place, and the right audience, for a real engagement with the ideas that matter most.

Innovation is the conference theme, and I believe that the public and the markets—in their collective wisdom—understand that innovations in the conduct of policy at the Fed will help deliver price stability alongside full employment.

Here is a quick overview of what I’ll cover in my remarks this morning. You can call it an outline . . . you can call it a trail map . . . just don’t call it forward guidance.

First, I’ll touch on a few of the longer-term questions we’re asking at the Fed about the latest general-purpose technology, artificial intelligence (AI), and where it might take the economy.

Then I’ll reflect a bit on the practice of forward guidance and the interaction between the central bank and financial markets.

Next, I’ll present some of the key principles that I believe should guide the conduct of monetary policy.

And, finally, I’ll give you my assessment of the economy.

Preparing for Future Policy Conjunctures

With the unchanging picture of the Tetons as our backdrop, we are here to survey an economic landscape that is anything but static.

It wasn’t so long ago—in the run-up to the crisis of 2008 and over the decade that followed—when economists and policymakers were speaking of secular stagnation and a global saving glut. It was a widely held view that an excess of capital would sit on the sidelines for a long, long time, because there just wouldn’t be enough compelling investment opportunities. All the good stuff had been invented. So growth would be low and slow.

Well, times sure have changed. We’ve come to a hinge point in history.

To cite the clearest example, progress in artificial intelligence—the 80-year-old name for the newest technology—has been faster even than its evangelists predicted a couple of years ago.

The potential for substantially higher growth is on the rise. Ever-expanding pools of capital are pouring into AI-related infrastructure of all sorts. A kind of hyper–Moore’s law seems to be playing out. Scaling laws, too, are changing both the method and speed of innovation.4

Capital and labor have combined to create the large language models at the heart of AI. Users buy tokens to gain access to the models. Reports put annualized token sales for the two leading labs alone at more than 100 billion dollar—an increase of 500-plus percent from a year ago.

The Fed watches all of this attentively. We recognize that AI is a new variable—potentially a new factor of production—that will have consequences for both the economy and the conduct of monetary policy. It opens some major lines of inquiry:

Will the application of AI cause a significant, sustained rise in productivity across the economy? And if so, when?

Will token usage be complementary or competitive to labor? Will the next generation of AI models demand even greater capital intensity, or will the models themselves help devise a capital-light solution?

Among the other yet unknowns is the resulting market structure. It’s not obvious where the returns on capital will land or on what timescale. Early on, how much of the surplus goes to owners of scarce assets—AI labs, chipmakers, energy producers, and cloud providers? Over time, how much of that value accrues to businesses and consumers? What are the broad implications for workers and for the employment side of the Fed’s mandate?

Likewise, we don’t yet know the equilibrium price of the tokens. Might there be a heterogeneity of tokens, such that growing sums will be paid for access to the best models at the frontier? Will token prices for older models fall to the level of their marginal cost?

We will be thinking through these matters with the help of a task force on productivity and jobs. My early check-ins with the leaders of that task force, and the four others, have been encouraging.

To be clear, though, their recommendations will come later and have no bearing on decisions we make in the current policy conjuncture. But I believe that for future policy challenges, this intellectual investment today will leave us far better prepared.

Forward Guidance and Its Stand-ins

As our task forces go about their work, I am not waiting to introduce innovations at the Fed to make us fit for purpose. To highlight one example, I have set out to change the form and function of the Fed Chairman’s so-called forward guidance. You might know about my long-time discomfort with early pronouncements of future policy decisions. I much prefer another path . . . and will make the case for it.

Transparency in communications about future policy decisions is not a virtue unto itself. Communications must be in service to the Fed’s paramount responsibility: getting monetary policy right.

Forward guidance as a regular practice was adopted by my colleagues and me during the Global Financial Crisis. It was essential at the time, and we introduced it with much fanfare. But, as with other legacies of crises past, I believe that the practice has overstayed its welcome.

In normal times, the role of forward guidance should be limited and circumscribed. Otherwise it risks creating ambiguity in the name of clarity. Oversharing policy deliberations and overcommitting to future decisions can lead markets, businesses, and households astray.7 And I believe when policymakers make quasi-commitments on interest rates through the cycle, we inhibit our own freedom to make the right calls when it’s time to decide.

To get policy right, we also need to get the relationship right between financial markets and the central bank. The Fed needs clear market signals, as unfiltered as possible . . . from market internals . . . the level and change in asset prices across sectors . . . the prices and trading volumes of Treasury securities. . . the foreign exchange value of the dollar . . . the cost and availability of credit . . . and the price of a broad set of commodities.

These and other indicators should inform the Fed’s near-term outlook on economic activity and inflation throughout the business cycle. They should also reveal the state of broader financial conditions . . . and the risks and uncertainties in the financial cycle.

At the same time, market participants themselves should be tracking real information across the economy. They should draw their own conclusions; form their own expectations of output, employment, and inflation; and stay sharply attuned to risks.

The Fed should be humble and never naïve. The Fed plays an essential role in the economy and the markets. And our tools are powerful. We determine the path of short-term interest rates. And market participants will always try to anticipate what we will do next. But we should not indulge a regime in which market participants are looking primarily to the Fed for their next trade.

The economic literature has long described the distorting effects: a hall-of-mirrors problem. If markets rely materially on the Fed’s guidance and the Fed relies on market prices, we are all more likely to be blinded to new developments . . . more likely to be caught unprepared for a turn of events . . . and more likely to commit errors in policymaking.

Perversely, market participants are unlikely to bear the biggest costs of the hall-of-mirrors problem. The most serious harm is likely to befall those without financial assets. If the Fed gets inflation wrong and judges the economy wrong, who gets the worst of it? Not the financial high-fliers. Hard-working Americans are the ones left to deal with inflation that is too high or jobs that suddenly appear less secure.

So, if forward guidance is ill-suited to normal times, then how about the new Fed chief commits—at the very least—to an explicit reaction function? Surely, he should tell us his interest rate path—if, say, the data were to come in hot or cold.

I wish our understanding of the economy were so precise as to provide a mechanical, tried-and-true answer—that some simple function like a Taylor rule could be rigorously relied upon. But our knowledge just doesn’t extend that far—at least not yet—and the factors most relevant to the proper conduct of monetary policy change over time.

Providing forecasts to illustrate the Fed’s reaction function works better in theory than in practice, better in the lab than in the field. I’m not alone in noticing that forward guidance in 2021, to cite one example, might well have slowed the policy response to high inflation.

In my term as Chairman, my colleagues and I will endeavor to construct more reliable models and more robust rules to guide policy decisions. We’ll do this knowing that accuracy in economic forecasting is still just an aspiration. With so much changing so fast in geopolitics, global supply chains, and technology, it’s wise to be modest about what we can and cannot know.

In the same spirit, we should receive the full range of ideas on matters that may inform the Fed’s monetary policy decisions. If the aim is optimal decisionmaking, we should not crowd out views on the economy.

How, then, to chart a better path to policy? In the balance of my remarks, I will share some key principles that guide my thinking on the appropriate conduct of monetary policy . . . then offer my promised assessment of the economy.

Key Principles

Turning to principles . . .

First, I’ve noticed that, in this line of work, yesterday’s news has a way of getting mistaken for what is happening right now. The challenge is to know the difference. In other words, we must interrogate reality to make sure we are not setting forward-looking policy based on stale or inaccurate data. Nor should we rely on isolated data points. Trends matter most. The Fed is a decisionmaking agency. We make choices amid uncertainty, and the data upon which we draw must be as relevant, contemporaneous, accurate, and actionable as possible.

Second, the Federal Reserve’s actions are intended to ensure that the aggregate demand side of the economy is broadly consistent with aggregate supply. However, all we observe directly is activity. We never see, and can only infer, what’s really happening on the supply side. Hence, evaluating the current and expected balance between aggregate supply and demand is imprecise.

Third, there should be no misunderstanding: The Fed’s price-stability objective of 2 percent, as measured by the personal consumption expenditures (PCE) price index, is a firm, fixed target. Let’s be equally clear about another aspect of the objective: Price stability is not self-executing, nor is inflation necessarily mean-reverting. It is the Fed’s job to deliver stable prices.

Fourth, the Fed also bears responsibility for maximum employment. Achieving both sides of our mandate over the medium term is not an either/or proposition. I do not believe that the Fed’s dual mandate works at cross-purposes. After all, high inflation itself is very harmful to economic prosperity.

Fifth, short-term interest rates are the predominant tool to achieve the dual mandate. Unconventional policies to spur economic activity may suit genuine crises but should otherwise be used sparingly, if at all.

Sixth, money matters. It’s not fashionable these days, but my view is that money has something important to do with monetary policy. We should pay attention to money created by the central bank and money that comes from the banking and financial systems. It’s true that financial innovations and other factors alter the mechanics that link the monetary base, the velocity of money, and the broader economy. But that is scarcely a reason to ignore the ultimate effects of money on financial conditions and prices.

Finally, a quieter Fed, more purposeful in its communications, is better able to meet its objectives. And we can be held accountable for delivering on our remit—the only true test of our credibility. To borrow a line from General Chuck Yeager, “At the moment of truth, there are either reasons or results.”

The Economy Today

Now, given these principles, how do I read the economy today? What’s really going on outside the window?

You may have read in the July minutes the unanimous view of the FOMC: Labor markets were stable, and output was solid. But inflation remained too high. A good majority of my colleagues and I thought the wiser course was to await new information in the intermeeting period—especially given possible developments in supply chains, investment flows, and geopolitics—before deciding whether a change in interest rate policy was advisable. And we expressed our joint readiness to act as circumstances might require.

For my part, today I am impressed by the overall performance of the economy, which appears to have strengthened. One indicator of strength is how well an economy holds up to shocks. On that score, both Main Street and Wall Street have been remarkably resilient.

Several observations:

Business capital expenditures—the seed corn of future economic growth—are rising rapidly. The four-quarter change in investment in equipment and intangibles has been around 9 percent, its highest growth rate since 2021. More than half of the cap-ex growth this year can likely be ascribed to the buildout related to AI.

For firms in the S&P 500, profits have grown by more than 20 percent over the past year. Profit margins are quite elevated, relative to history. Overall equity market volatility is low. We’re staying keenly focused on market internals, watching performance across sectors.

Expectations for growth in both cap-ex and corporate earnings are running quite high. I will continue to watch the change in their growth rates, the second derivative. The follow-on effects on asset prices, business confidence, consumer income, and spending are equally important to gauge.

Credit spreads on corporate bonds and leveraged loans are near the low ends of their historical ranges, and issuance volumes in these markets have been quite strong this year. Looking beyond fixed-income markets to the banking business, in the July Senior Loan Officer Opinion Survey on Bank Lending Practices, banks tell us that standards for commercial and industrial loans are on the easier end of their historical range. That helps explain the growth we’ve seen this year in those loans. Credit and loan markets are showing few signs of policy restraint.

Certain sectors—like housing and agriculture—are showing strains. But, on balance, I would be hard pressed to describe broad financial conditions as restrictive.

Real consumer spending has been healthy despite the shocks, increasing more than 2 percent over the past four quarters. Combining consumption with the brisk investment we’ve observed, private domestic final purchases (PDFP) has also risen. PDFP has increased at a pace of nearly 3 percent so far this calendar year. That’s a measure that typically carries more signal than gross domestic product, and the trend here too is positive.

On the employment side of the Fed’s dual mandate, our country is doing well. Labor markets are quite stable. The jobless rate, at 4.1 percent, remains low by historical standards and has not changed much for a couple of years. Unemployment claims, on a four-week average—an empirically robust real-time indicator—are near their lowest level in decades.

In my view, the relatively low turnover in today’s labor market is partly a result of the significant rematching between employers and employees that happened at scale in the post-pandemic environment.

When labor supply is barely growing, monthly job gains are naturally going to run low. There are always areas of concern in the labor market—for example, among recent graduates. In general, though, people who want to work, by and large, are holding or finding jobs. They may well be concerned about possible future labor disruptions, but as of now, I believe the labor markets are consistent with full employment.

But on the price-stability side of our mandate, the numbers are more concerning. The Fed’s preferred measure of inflation, the 12-month change in the PCE price index, stands at 3.7 percent, while the six-month change is 4.1 percent. The comparable measures from the consumer price index (CPI) are also elevated, as are the core measures of both PCE and CPI inflation. None of these measures are perfect, but they all tell a similar story: Inflation is running above our 2 percent target. So the Fed’s predominant focus right now should be on prices.

The job for policymakers is to capture underlying trend inflation—that is, the generalized change in prices in the economy, unaffected by idiosyncratic factors. We want to gauge whether underlying inflation is rising, falling, or stuck in place. We also want to understand not just the direction of travel, but also the speed. Each of these broad inflation measures has fallen significantly from their 2022 heights. But progress over the past two years has been modest.

And while this summer’s PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved.

The data also show moderate wage growth. But in tracking underlying inflation, wage growth has not proven a reliable indicator of future inflation for a very long time.

To try to gauge underlying inflation, I find it instructive to disaggregate the 199 individual components of the PCE price measure. Over the past 12 months, 54 percent of goods and services in the PCE basket showed price increases above 3 percent. This is well below the post-pandemic highs of about 77 percent, but it remains well above the level of 32 percent in the two decades that preceded the pandemic.

Looking over just the past six months, the conclusion is similar: Of goods and services in the PCE basket, 49 percent showed annualized price increases above 3 percent. Again, this is well below the post-pandemic highs but still quite elevated.

The recent rise in overall commodity prices also bears watching. What we need to judge is whether trends indicate upside inflation risks.

It matters, too, whether the inflation readings of the past five-plus years have seeped into expectations. The good news is that measures of inflation expectations in the medium term, by and large, look stable. And inflation compensation measures from the swaps market send a strong and similar message.

Especially in light of recent developments, it is a credit to the Fed as an institution—and consistent with the best of the Fed’s traditions—that market prices show confidence that we will deliver price stability. And I can assure you . . . they’re right.

The thing about market measures of inflation expectations in economic history is that they tend to look strong and durable until they don’t. Those expectations are not pushed around easily, and right now they are well anchored. But they must be closely minded. It’s the Fed’s job to make sure that inflation expectations do not get unanchored.

There is one signal nobody can miss: The responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank. And that is where it belongs.

Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That’s our job . . . our mandate . . . and our charge to keep.

Conclusion

I stand here today committed to a discipline, not to a decision.

My Fed colleagues and I are hardly the first to hold these positions in a time of great consequence. We are determined to redeem the time by doing our very best work.

We take our responsibility seriously, with humility and with resolve. So much depends on choices we make. Sound monetary policy helps households and businesses to prosper. When carried out effectively, it broadens and deepens the momentum of our economy . . . and helps to secure America’s leadership in the world. And I know that our country needs us to think carefully and act wisely.

It is a tremendous honor to serve once again at the Federal Reserve. I am truly grateful for the encouragement and good counsel I’ve received from my colleagues . . . and from so many of you in this room. For that, and for your kind attention this morning, I thank you.

FAQs

1. What did Kevin Warsh say about US inflation?
Kevin Warsh said inflation remains too high, with the Fed’s preferred PCE inflation measure at 3.7% over 12 months, well above the Federal Reserve’s 2% target.

2. Did Kevin Warsh provide guidance on future interest-rate decisions?
No. Warsh avoided committing to a specific interest-rate path and emphasized that monetary policy should remain flexible and responsive to incoming economic data.

3. Why does Kevin Warsh want less forward guidance?
Warsh argued that excessive forward guidance can limit the Federal Reserve’s flexibility and may cause markets, businesses and households to form expectations that become outdated as economic conditions change.

4. What did Warsh say about the US economy?
He gave a broadly positive assessment, pointing to strong business investment, rising corporate profits, healthy consumer spending, stable labour markets and supportive credit conditions.

5. What role could artificial intelligence play in the economy?
Warsh said AI could significantly affect productivity, investment, employment, capital formation and the future conduct of monetary policy, making it an important factor for the Federal Reserve to monitor.

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Warsh said the U.S. economy has demonstrated considerable resilience, with strong business investment, healthy consumer spending, stable labour markets and solid corporate profitability. However, he emphasized that inflation remains above the Fed’s 2% target and argued that policymakers must remain focused on price stability.

Here are the Top 10 highlights from Kevin Warsh’s Jackson Hole speech.

1. Inflation Remains the Fed’s Main Concern

Warsh’s strongest message was that inflation is still running too high. The Fed’s preferred inflation measure, the 12-month change in the PCE price index, stood at 3.7%, while the six-month change was 4.1%.

He also pointed to elevated CPI and core inflation readings and said:

“None of these measures are perfect, but they all tell a similar story: Inflation is running above our 2 percent target. So the Fed’s predominant focus right now should be on prices.”

Warsh said policymakers need to determine whether underlying inflation is rising, falling or remaining stuck and emphasized that recent progress has been modest.

2. Fed’s 2% Inflation Target Remains Firm

Warsh sought to make clear that the Federal Reserve’s long-term inflation objective has not changed. He described the 2% PCE inflation target as a firm, fixed target and said price stability is the responsibility of the central bank.

He stated:

“Third, there should be no misunderstanding: The Fed’s price-stability objective of 2 percent, as measured by the personal consumption expenditures (PCE) price index, is a firm, fixed target.”

Warsh added that price stability is not automatic and that the Fed has to deliver stable prices.

3. Rate Policy Could Remain Focused on Inflation

Although Warsh did not explicitly announce what the Fed will do at its next meeting, his comments placed considerable emphasis on the need to respond if inflation does not move toward the central bank’s objective.

He said:

“short-term interest rates are the predominant tool to achieve the dual mandate.”

Warsh also said unconventional measures designed to stimulate economic activity should generally be used sparingly outside genuine crises. His comments reinforce the importance of incoming inflation and economic data in determining the future path of interest rates.

4. U.S. Economy Appears Stronger and Resilient

Warsh presented a relatively positive assessment of the U.S. economy. He said the economy appears to have strengthened and highlighted its ability to withstand economic shocks.

Business investment has been particularly strong. Warsh said the four-quarter change in investment in equipment and intangibles has been around 9%, its highest growth rate since 2021. More than half of this year’s capital expenditure growth can likely be attributed to AI-related investment.

Corporate profitability has also remained strong, with S&P 500 companies recording profit growth of more than 20% over the past year.

5. Financial Conditions Are Not Broadly Restrictive

Another important part of Warsh’s assessment was his view that financial conditions are not currently imposing broad policy restraint.

Credit spreads on corporate bonds and leveraged loans are near the lower end of their historical ranges, while issuance has remained strong. Banks also reported relatively easy lending standards for commercial and industrial loans.

Warsh said:

“Certain sectors—like housing and agriculture—are showing strains. But, on balance, I would be hard pressed to describe broad financial conditions as restrictive.”

This assessment is significant because it suggests that monetary conditions may not be sufficiently tight to bring inflation down quickly.

6. Labour Market Remains Relatively Stable

Warsh also offered a constructive assessment of employment conditions. He said labour markets are quite stable, while the unemployment rate of 4.1% remains low by historical standards.

Unemployment claims based on the four-week average are also near their lowest levels in decades.

Warsh acknowledged that some areas, including recent graduates, continue to face challenges. However, he said that overall, people who want to work are generally holding or finding jobs and that labour markets are consistent with full employment.

7. Inflation Is Broad-Based Across PCE Components

Warsh examined the individual components of the PCE inflation measure to assess whether price pressures are widespread.

He said that over the past 12 months, 54% of goods and services in the PCE basket recorded price increases above 3%. Although this was significantly below the post-pandemic high of around 77%, it remained considerably above the 32% level recorded during the two decades before the pandemic.

Looking at the past six months, 49% of PCE goods and services recorded annualized price increases above 3%.

Warsh said these figures suggest inflation remains elevated even though it has fallen substantially from its pandemic-era peak.

8. Warsh Wants a Quieter and Less Predictive Fed

Warsh argued that the Federal Reserve should change how it communicates future monetary policy. He expressed discomfort with extensive forward guidance and said that policymakers should retain flexibility when making decisions.

He argued that excessive guidance can create confusion rather than clarity and may cause markets, companies and households to make decisions based on expectations that could later prove incorrect.

Warsh said:

“Transparency in communications about future policy decisions is not a virtue unto itself. Communications must be in service to the Fed’s paramount responsibility: getting monetary policy right.”

He also warned against a situation where financial markets focus excessively on predicting the Fed’s next move instead of evaluating economic information themselves.

9. AI Could Transform Productivity and Economic Growth

Artificial intelligence was another major theme of Warsh’s speech. He described the rapid development of AI as a major turning point for the economy and said the technology could potentially lead to substantially higher growth.

Warsh noted that large amounts of capital are being invested in AI infrastructure and said:

“We’ve come to a hinge point in history.”

He also raised several unanswered questions about AI, including whether it will generate a sustained increase in productivity, whether AI will complement or compete with labour, and how the economic gains from the technology will be distributed among AI companies, chipmakers, energy producers, cloud providers, businesses, consumers and workers.

The Fed is studying these issues through a task force focused on productivity and jobs. However, Warsh made clear that its recommendations will not influence current monetary-policy decisions.

10. Fed Must Focus on Results and Maintain Credibility

Warsh concluded by emphasizing discipline, responsibility and the need for the Federal Reserve to deliver on its mandate.

He said:

“A quieter Fed, more purposeful in its communications, is better able to meet its objectives. And we can be held accountable for delivering on our remit—the only true test of our credibility. To borrow a line from General Chuck Yeager, “At the moment of truth, there are either reasons or results.”

Warsh also acknowledged that the central bank carries responsibility for the prolonged period of elevated inflation and said policymakers must ensure that underlying inflation is moving toward the Fed’s objective at a sufficient pace.

His closing message was:

“I stand here today committed to a discipline, not to a decision.”

Inflation Data Keeps Pressure on Fed

Warsh’s comments come as U.S. inflation remains above the Federal Reserve’s 2% objective. The PCE price index was running at 3.7% over 12 months, while the six-month measure was 4.1%.

At the same time, Warsh noted that inflation expectations remain broadly stable. He said market-based measures indicate that expectations are currently well anchored, although the Fed needs to ensure they do not become unanchored.

He also highlighted the recent rise in commodity prices as an area that requires monitoring for potential upside inflation risks.

Warsh Sees Strong Investment and Consumer Spending

The Fed chairman’s economic assessment was not entirely negative. Real consumer spending has increased by more than 2% over the past four quarters, while private domestic final purchases have risen at a pace of nearly 3% so far this calendar year.

Business capital expenditure has also expanded rapidly, with AI-related investment accounting for a significant portion of the growth.

Corporate profits have increased by more than 20% over the past year, while profit margins remain elevated compared with historical levels.

These indicators suggest that the economy continues to have considerable momentum even as inflation remains a concern.

What Does Kevin Warsh’s Speech Mean for Interest Rates?

Warsh did not provide a specific interest-rate path or announce that the Fed has decided to raise rates. Instead, he emphasized that monetary policy should respond to current and relevant economic information.

He said policymakers should not rely on stale information or isolated data points and should instead focus on trends. He also stressed that economic forecasting remains uncertain because geopolitics, global supply chains and technology are changing rapidly.

The speech therefore reinforces a data-dependent approach, with inflation trends likely to remain particularly important for future policy decisions.

What Investors Should Watch After the Jackson Hole Speech

Following Warsh’s comments, investors are likely to focus closely on upcoming inflation, employment and economic-growth data. Financial-market conditions, Treasury yields, credit markets, commodity prices and inflation expectations will also remain important indicators.

The Fed chairman’s message was clear that the central bank cannot assume inflation will automatically return to target. If underlying price pressures fail to move toward 2% at a sufficient pace, policymakers may need to consider further action.

For now, however, Warsh emphasized discipline rather than announcing a specific policy move.

FAQ’s

1. What was the main message from Kevin Warsh’s Jackson Hole speech?
Kevin Warsh’s main message was that inflation remains above the Federal Reserve’s 2% target and that price stability should remain the Fed’s predominant focus. At the same time, he described the U.S. economy as resilient, with strong investment, healthy consumer spending and relatively stable labour-market conditions.

2. Did Kevin Warsh announce a Federal Reserve interest-rate hike?
No. Warsh did not announce a specific interest-rate decision or provide a fixed path for future rates. Instead, he emphasized that monetary policy should be guided by relevant economic data and trends, particularly developments in underlying inflation.

3. What inflation figures did Kevin Warsh highlight in his speech?
Warsh noted that the 12-month PCE inflation rate stood at 3.7%, while the six-month measure was 4.1%. He also said 54% of PCE components had recorded price increases above 3% over the previous 12 months, while 49% had done so on an annualized basis over the previous six months.

4. What did Kevin Warsh say about the U.S. economy?
Warsh described the economy as resilient and said its overall performance appeared to have strengthened. He highlighted business investment growth of around 9% on a four-quarter basis, S&P 500 profit growth of more than 20%, consumer spending growth of more than 2% and relatively stable employment conditions.

5. What did Kevin Warsh say about artificial intelligence and the economy?
Warsh described AI as a major technological development with the potential to significantly increase productivity and economic growth. However, he said several questions remain about AI’s effect on workers, investment, market structure and the distribution of economic gains. He also clarified that the Fed’s AI task-force recommendations will not affect current policy decisions.

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Speaking at the Jackson Hole gathering in Wyoming on Friday, Warsh highlighted the resilience of the U.S. economy while expressing concern that inflation remains above the Federal Reserve’s 2% target.

Warsh pointed to a stable labour market, strong investment and resilient consumer spending as signs that the economy continues to hold up well. At the same time, he stressed that price pressures remain higher than policymakers and consumers would prefer.

The consumer price index showed that prices increased 3.4% over the 12 months through July, while the Federal Reserve’s preferred inflation gauge recorded a 3.7% increase over the same period.

Warsh said:

“None of these measures are perfect,”. “But they all tell a similar story: Inflation is running above our 2% target. So the Fed’s predominant focus right now should be on prices.”

September Fed Rate Hike Bets Rise After Warsh Speech

Financial markets interpreted Warsh’s comments as a more hawkish signal from the Federal Reserve. Before his speech, investors had placed the probability of a September rate increase at roughly one in three.

Following his remarks, expectations moved higher, with the implied probability of a September hike rising to above 50%.

Warsh has continued to avoid providing a detailed roadmap for upcoming monetary policy decisions. His reluctance to offer specific forward guidance reflects his view that excessive commentary about future rates could restrict the central bank’s flexibility and influence market expectations in ways that may not accurately reflect economic conditions.

Warsh Calls for a Quieter Federal Reserve

Investors had previously been looking for greater clarity after Warsh emphasised the importance of restoring price stability but stopped short of outlining a specific path for interest rates.

At the Jackson Hole event, Warsh again argued in favour of a more measured communication strategy for the central bank.

“A quieter Fed, more purposeful in its communications, is better able to meet its objectives,”

Warsh told the annual gathering of economist and central bankers at the Jackson Lake Lodge.

“And we can be held accountable for delivering on our remit—the only true test of our credibility. To borrow a line from General Chuck Yeager, ‘At the moment of truth, there are either reasons or results.'”

The comments suggest that Warsh wants monetary policy decisions to remain closely tied to incoming economic data rather than being guided by predetermined commitments on future interest rates.

Inflation Remains Above the Fed’s 2% Target

Inflation continues to be one of the most important factors shaping the Federal Reserve’s policy outlook. While economic activity has remained relatively resilient, the latest price data indicate that inflation has not yet returned to the central bank’s target.

Warsh’s comments place greater emphasis on controlling price pressures at a time when investors are assessing whether the Fed may need to maintain or increase borrowing costs.

The shift in rate expectations could also influence financial markets, including U.S. Treasury yields, the dollar, equities and precious metals, as investors adjust portfolios to reflect the possibility of tighter monetary policy.

Kevin Warsh Highlights AI’s Economic Potential

Warsh also discussed the growing role of artificial intelligence in the U.S. economy, describing the rapid development of the technology as a major turning point.

He expects AI investment and innovation to potentially increase productivity and reduce costs over time. However, he also acknowledged uncertainty surrounding how the economic gains will be distributed and what the technology could mean for workers.

In the near term, however, the large-scale investment required for AI infrastructure is adding to some inflationary pressures. Spending on data centres has contributed to higher construction costs, while demand for memory chips has also increased.

Artificial intelligence is one of the areas being examined by task forces appointed by Warsh to advise the Federal Reserve. However, he made clear that their work will not influence immediate interest-rate decisions.

Warsh said:

“Their recommendations will come later and have no bearing on decisions we make in the current policy conjuncture,”. “But I believe that for future policy challenges, this intellectual investment today will leave us far better prepared.”

What Warsh’s Comments Mean for Markets

The key takeaway from Warsh’s Jackson Hole remarks is that inflation remains the Federal Reserve’s primary concern, while the central bank is keeping its options open on future interest-rate decisions.

With inflation still above the 2% target, investors are now assigning a greater probability to a September rate hike. However, Warsh has not explicitly confirmed that rates will be increased, meaning upcoming economic data will remain crucial for determining the Fed’s next move.

For gold and silver investors, a stronger rate-hike outlook could create pressure through higher U.S. yields and a potentially stronger dollar. Conversely, any signs of cooling inflation or weakening economic activity could revive expectations for a less restrictive monetary-policy stance.

FAQ’s

1. What did Kevin Warsh say about U.S. inflation?

Kevin Warsh said inflation remains above the Federal Reserve’s 2% target and indicated that controlling price pressures should remain the central bank’s primary focus. He pointed to several inflation measures showing a similar trend, reinforcing concerns that inflation has not yet returned to the desired level.

2. Did Kevin Warsh confirm that the Fed will raise interest rates in September?

No. Warsh did not confirm a September rate hike or provide a specific path for interest rates. However, his firm comments about persistent inflation were interpreted by financial markets as a hawkish signal, causing expectations for a September increase to rise above 50%.

3. Why did markets increase their expectations for a September rate hike?

Investors reacted to Warsh’s emphasis on inflation remaining above the Fed’s target. Before his speech, markets had placed the probability of a September hike at roughly one in three. After his remarks, that probability moved above 50%, reflecting increased expectations for tighter monetary policy.

4. How could higher U.S. interest rates affect gold and silver?

Higher interest rates can potentially weigh on gold and silver because rising Treasury yields can make interest-bearing assets relatively more attractive. A stronger U.S. dollar can also create additional pressure on dollar-denominated precious metals. However, the actual market response will depend on inflation, economic data and Federal Reserve policy expectations.

5. What did Kevin Warsh say about artificial intelligence?

Warsh described artificial intelligence as a significant economic turning point and expressed optimism that technological advances could increase productivity and reduce costs. At the same time, he noted uncertainties surrounding the distribution of economic benefits and the potential impact on workers. He also highlighted near-term inflationary pressure from AI infrastructure investment.

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Warsh’s first major Jackson Hole address comes at a particularly sensitive time for markets. Investors want to understand how the new Fed chief views persistent inflation, rising borrowing costs, government debt and the central bank’s independence from the Trump administration.

Jackson Hole Speech Gains Importance as Bond Yields Rise

Warsh has previously indicated that he does not want to reveal detailed policy plans before receiving recommendations from five task forces established earlier in his tenure.

However, the backdrop has changed significantly. US and global bond yields have moved higher, increasing pressure on the Fed to explain how it intends to respond to changing financial conditions.

Markets are also assessing whether higher long-term borrowing costs represent a temporary adjustment or the beginning of a longer period of elevated interest rates.

Economists have pointed to several structural factors behind the increase in yields, including rising government debt, changes in global trade, demographic pressures and increased investment in artificial intelligence.

Investors Want Clearer Signals on Interest Rates

One of the biggest questions surrounding Warsh’s speech is whether he will provide more insight into the Fed’s thinking on interest rates. US inflation has remained above the central bank’s 2% target, keeping policymakers concerned about the risk that price pressures could become entrenched.

Recent discussions within the Federal Open Market Committee have also highlighted the risk of waiting too long to raise rates. Some policymakers have warned that delaying action could eventually require larger increases in borrowing costs.

Against this backdrop, investors are looking for clues about whether Warsh believes additional rate increases could become necessary if inflation fails to moderate.

Why Rising Treasury Yields Are Creating Concern

The recent increase in Treasury yields has become an important part of the policy debate. Normally, the Federal Reserve focuses on short-term interest rates rather than directly controlling longer-term Treasury yields. However, significant movements across the bond market can influence financial conditions, borrowing costs and the transmission of monetary policy.

The situation has become more complicated because the US Treasury Department has taken a more active approach to debt-market management. Treasury Secretary Scott Bessent’s recent actions have added another factor for investors to consider when assessing the direction of bond yields.

If short-term government borrowing rates begin to diverge significantly from the Fed’s policy rate, managing monetary conditions could become more challenging.

Fed Independence From Trump Administration Under Watch

Warsh’s relationship with President Donald Trump is another major issue heading into Thursday’s speech. Trump previously pushed the Federal Reserve for lower interest rates during Jerome Powell’s tenure. Although Warsh has so far avoided the same level of public pressure, questions remain about how closely the new Fed chair communicates with the administration.

Senate Democrats on the Banking Committee have sought greater clarity regarding Warsh’s communications with Trump following reports that the two have held regular conversations.

As a result, investors will be watching not only what Warsh says about monetary policy, but also whether his comments reinforce confidence in the Fed’s independence.

Warsh Faces Pressure to Address the Economy Now

Warsh has expressed a preference for discussing broader economic principles rather than providing detailed forward guidance on future interest-rate decisions.

That approach could face its biggest test at Jackson Hole. The symposium gives Fed leaders a global platform to communicate their assessment of the economy. Previous Fed chairs have used the event to introduce major policy ideas or send powerful signals about the direction of monetary policy.

Investors therefore want Warsh to explain how he is assessing current inflation, economic growth and financial-market conditions rather than focusing exclusively on long-term reforms.

Global Savings Dynamics Are Changing

Another factor behind the bond-market anxiety is the changing global supply and demand for capital. For years, economists pointed to abundant global savings as a factor that helped keep interest rates relatively low. That environment is now being challenged by higher government borrowing, increased infrastructure and technology investment, demographic changes and fragmented global supply chains.

The rapid expansion of artificial-intelligence investment is also competing for available capital. These structural developments could keep interest rates higher for longer, even if the Federal Reserve eventually begins adjusting its policy rate.

Dollar Weakness Adds Another Layer to the Inflation Debate

The US dollar has weakened against several major currencies in recent weeks, adding another potential source of inflationary pressure. A weaker dollar can increase the cost of imported goods and commodities, potentially making it harder for inflation to return sustainably to the Fed’s 2% objective.

That makes the interaction between interest rates, Treasury yields and the dollar particularly important for markets ahead of Warsh’s speech.

What Warsh Could Say About Future Rate Hikes

Investors will be watching for any indication that the Fed is becoming more concerned about persistent inflation. A message suggesting that rate hikes could be necessary if inflation remains elevated could push Treasury yields and the dollar higher.

On the other hand, if Warsh emphasizes economic risks, financial stability or the possibility that current policy is already sufficiently restrictive, markets could interpret the speech as less hawkish.

The Fed chief may also avoid giving a specific signal on the next meeting, instead emphasizing that future decisions will remain dependent on incoming economic data.

What Jackson Hole Could Mean for Gold and Silver Prices

Warsh’s speech could also have significant implications for gold and silver prices.

A hawkish message, particularly if it increases expectations for higher interest rates, could lift Treasury yields and the US dollar. Higher yields generally increase the opportunity cost of holding non-yielding assets such as gold, potentially creating short-term pressure on precious metals.

Conversely, a cautious or dovish message could weaken the dollar and reduce yield expectations, potentially supporting gold and silver.

For precious-metals traders, the key signals will be Warsh’s comments on inflation, interest rates, Treasury yields, the dollar and Fed independence.

Market Outlook Ahead of Warsh’s Speech

The Jackson Hole speech arrives at a crucial moment for the Federal Reserve and global financial markets. Persistent inflation, rising bond yields, elevated government debt and questions about the Fed’s policy direction have created an unusually complicated environment for the new Fed chair.

While Warsh may avoid offering explicit forward guidance, investors will closely examine every indication of how he views the inflation outlook and the appropriate path for interest rates.

For gold and silver markets, the speech could become an important catalyst, particularly if Warsh delivers a stronger-than-expected message on inflation or signals that higher rates may be needed in the coming months.

FAQ’s

1. When will Kevin Warsh deliver his Jackson Hole speech?

Federal Reserve Chair Kevin Warsh is scheduled to speak on Thursday, August 27, 2026, at the annual Jackson Hole Economic Symposium. It will be his debut address at the closely watched central banking conference and comes as investors seek greater clarity on the Fed’s policy direction.

2. Why is Warsh’s Jackson Hole speech important for markets?

The speech comes as US Treasury yields have risen and inflation remains above the Federal Reserve’s 2% target. Investors want to know how Warsh views the economy, inflation risks and future interest rates. Any unexpectedly hawkish or dovish comments could trigger significant moves across financial markets.

3. Could Warsh signal future US interest-rate hikes?

Warsh may avoid giving direct forward guidance, but investors will closely analyze his comments for indications about future rate increases. If he emphasizes persistent inflation and the need to restore price stability, markets could increase expectations for higher rates in the coming months.

4. How could the Jackson Hole speech affect gold and silver prices?

A hawkish Warsh speech could strengthen the US dollar and push Treasury yields higher, potentially weighing on gold and silver. A more dovish message could have the opposite effect by lowering rate expectations and weakening the dollar, which may provide support to precious metals.

5. Will Warsh discuss the Federal Reserve’s independence?

Fed independence is expected to remain an important issue surrounding the speech. Investors are watching Warsh’s relationship with the Trump administration and whether his comments demonstrate that monetary-policy decisions will continue to be guided primarily by inflation, employment and broader economic conditions.

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Fed Maintains Rates but Internal Divide Emerges

Although the Federal Reserve decided to leave interest rates unchanged, several officials favored tighter monetary policy. Dallas Fed President Lorie Logan argued that interest rates should be “modestly” higher to control inflation.

Meanwhile, Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Fed Governor Christopher Waller dissented from the committee’s decision, signaling concern that inflation may remain persistent and require additional rate increases.

Chair Kevin Warsh: Fed Will Act if Inflation Persists

During the post-meeting press conference, Fed Chair Kevin Warsh emphasized that the central bank remains committed to achieving its 2% inflation target and will not hesitate to tighten policy if necessary.

Warsh said the Fed would avoid giving forward guidance on future rate decisions, preferring to assess incoming economic data and market reactions before making any policy adjustments. He stressed that every meeting remains data-dependent and that policymakers stand ready to act whenever appropriate.

Treasury Yields Climb After Fed Decision

Financial markets reacted quickly to the Fed’s statement. U.S. Treasury yields surged as investors reassessed the likelihood of future interest rate increases.

• The 30-year Treasury yield climbed above 5.2%, reaching its highest level since 2007.
• The 10-year Treasury yield rose more than 7 basis points to 4.677%.

The jump in bond yields reflected investor concerns that interest rates could remain elevated for longer if inflation pressures persist.

Inflation Outlook Remains Uncertain

Recent inflation data has shown signs of easing. A temporary decline in gasoline prices helped the U.S. Consumer Price Index (CPI) post an unexpected 0.4% decline in June, offering some relief to policymakers.

However, the recent rebound in crude oil prices—driven largely by geopolitical tensions in the Middle East—has renewed concerns that inflation could accelerate again in the coming months.

September Fed Meeting in Focus

Market participants are now turning their attention to upcoming inflation, employment, and economic growth data ahead of the Fed’s September meeting.

Jerry Templeman, former senior analyst at the New York Fed and now Vice President of Economics and Fixed Income Research at Mutual of America Capital Management, said the economic outlook could change significantly before the next policy meeting.

According to Templeman, the upcoming economic data will play a crucial role in determining whether the Federal Reserve maintains its current policy stance or resumes raising interest rates later this year.

Market Outlook

The Federal Reserve’s latest policy decision leaves investors closely watching inflation trends, energy prices, Treasury yields, and upcoming economic reports. While rates remain unchanged for now, policymakers have made it clear that further tightening remains a possibility if inflation fails to move sustainably toward the Fed’s 2% target.

FAQs

1. Why did the Federal Reserve keep interest rates unchanged?

The Federal Reserve held interest rates at 3.50%-3.75% because policymakers want more economic data before making further policy changes. While inflation has eased, officials believe it is still too early to declare victory over rising prices.

2. What did Fed Chair Kevin Warsh say after the meeting?

Kevin Warsh said the Federal Reserve remains committed to achieving its 2% inflation target and will not hesitate to tighten monetary policy if inflation remains elevated. He also emphasized that future decisions will depend on incoming economic data.

3. Why did Treasury yields rise after the Fed’s announcement?

Treasury yields climbed because investors believe interest rates could remain higher for longer. The market interpreted the Fed’s comments as a sign that additional rate hikes remain possible if inflation fails to slow further.

4. Why are investors closely watching the September Fed meeting?

The September meeting is expected to be crucial because it will follow the release of key inflation, employment, and economic growth data. These reports could determine whether the Federal Reserve maintains its current policy or resumes raising interest rates.

5. What factors could influence the Fed’s next policy decision?

Future Fed decisions will depend on inflation trends, labor market conditions, economic growth, crude oil prices, Treasury yields, and broader geopolitical developments. These factors will help determine whether inflation is moving sustainably toward the central bank’s 2% target.

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मूल्य स्थिरता को बताया सबसे बड़ा लक्ष्य

हाउस फाइनेंशियल सर्विसेज कमेटी के सामने अपने पहले संबोधन में वार्श ने कहा कि फेड का “नंबर एक उद्देश्य” सही मौद्रिक नीति लागू करना है। उनका कहना था कि अगर नीतियां सही रहीं, तो पिछले पांच वर्षों से बनी महंगाई की समस्या समाप्त हो जाएगी।

उन्होंने यह भी कहा कि हर महीने कीमतों में उतार-चढ़ाव सामान्य बात है, खासकर वैश्विक अनिश्चितताओं के दौर में, लेकिन लंबी अवधि की महंगाई पर सबसे बड़ा असर मौद्रिक नीति का ही होता है।

लगातार ऊंची महंगाई स्वीकार नहीं

केविन वार्श ने कहा कि फेडरल रिजर्व लगातार ऊंची महंगाई को किसी भी स्थिति में स्वीकार नहीं करेगा। उनके अनुसार मूल्य स्थिरता बहाल करना केवल फेड का नहीं बल्कि पूरे नीति तंत्र का साझा और अनिवार्य लक्ष्य है।

उन्होंने अपने पूर्ववर्ती जेरोम पॉवेल की तरह माना कि लंबे समय तक ऊंची महंगाई ने अमेरिकी परिवारों और कारोबारों पर अतिरिक्त आर्थिक बोझ डाला है।

फिलहाल ब्याज दरों में कोई बदलाव नहीं

जून में हुई अपनी पहली Federal Open Market Committee (FOMC) बैठक में वार्श ने अन्य सदस्यों के साथ सर्वसम्मति से फेडरल फंड्स रेट को 3.50% से 3.75% के दायरे में स्थिर रखने का समर्थन किया। यह लगातार चौथी बैठक थी, जिसमें ब्याज दरों में कोई बदलाव नहीं किया गया।

हालांकि बैठक में शामिल 18 में से 9 नीति निर्माताओं ने वर्ष के अंत तक कम से कम एक बार ब्याज दर बढ़ाने की संभावना जताई। वार्श ने स्वयं किसी भविष्य की ब्याज दर का अनुमान जारी नहीं किया।

अमेरिकी अर्थव्यवस्था मजबूत, AI निवेश बना प्रमुख आधार

वार्श ने कहा कि अमेरिकी अर्थव्यवस्था अभी भी मजबूत गति से आगे बढ़ रही है। उनके अनुसार वर्तमान आर्थिक माहौल की सबसे बड़ी विशेषता बिजनेस निवेश में तेज बढ़ोतरी है।

उन्होंने विशेष रूप से डेटा सेंटर, आर्टिफिशियल इंटेलिजेंस (AI) उपकरण और सॉफ्टवेयर में हो रहे निवेश का उल्लेख किया। उनके मुताबिक पहले तिमाही तक उपकरणों में निवेश लगभग 8% बढ़ा, जबकि हाई-टेक निवेश चार तिमाहियों के आधार पर करीब 25% की दर से बढ़ा।

हालांकि उन्होंने यह भी कहा कि अभी यह स्पष्ट नहीं है कि AI निवेश का अर्थव्यवस्था, महंगाई और रोजगार पर अंतिम प्रभाव कितना होगा। फेड इन सभी पहलुओं पर लगातार नजर बनाए हुए है।

फेड के कामकाज की होगी व्यापक समीक्षा

केविन वार्श ने बताया कि उन्होंने फेडरल रिजर्व की कार्यप्रणाली की समीक्षा के लिए पांच आंतरिक टास्क फोर्स गठित की हैं।

ये समूह निम्नलिखित क्षेत्रों की समीक्षा करेंगे:

• फेड की संचार व्यवस्था
• बैलेंस शीट प्रबंधन
• आर्थिक आंकड़ों का उपयोग
• उत्पादकता और रोजगार
• महंगाई के आकलन और नीति ढांचा

इन टास्क फोर्स का उद्देश्य वर्तमान व्यवस्थाओं की समीक्षा कर सुधार संबंधी सुझाव देना है।

आगे क्या रहेगा बाजार का फोकस?

अब निवेशकों की नजर कांग्रेस में वार्श की गवाही, आगामी आर्थिक आंकड़ों और फेड की भविष्य की ब्याज दर नीति पर रहेगी। यदि महंगाई में अपेक्षित कमी जारी रहती है, तो बाजार फेड के अगले कदमों का आकलन इन्हीं संकेतों के आधार पर करेगा।

Kevin Warsh की टेस्टीमोनी से जुड़े सवाल जवाब, FAQ’s

1. केविन वार्श ने कांग्रेस में क्या कहा?

उन्होंने कहा कि पिछले पांच वर्षों से लक्ष्य से ऊपर बनी महंगाई को खत्म करना फेडरल रिजर्व का सबसे बड़ा उद्देश्य है और सही मौद्रिक नीति के जरिए इसे नियंत्रित किया जाएगा।

2. क्या फेड ने ब्याज दरों में बदलाव किया है?

नहीं। जून की FOMC बैठक में फेड ने ब्याज दरों को 3.50% से 3.75% के दायरे में लगातार चौथी बार स्थिर रखने का फैसला किया।

3. AI निवेश को लेकर वार्श की क्या राय है?

उन्होंने कहा कि डेटा सेंटर, AI उपकरण और सॉफ्टवेयर में तेजी से निवेश हो रहा है, जो अमेरिकी अर्थव्यवस्था को मजबूती दे रहा है। हालांकि इसके दीर्घकालिक प्रभावों पर फेड लगातार नजर रखे हुए है।

4. फेड ने कौन-कौन से नए टास्क फोर्स बनाए हैं?

फेड ने संचार व्यवस्था, बैलेंस शीट, आर्थिक आंकड़ों, उत्पादकता एवं रोजगार तथा महंगाई नीति की समीक्षा के लिए पांच आंतरिक टास्क फोर्स गठित किए हैं।

5. बाजार अब किन बातों पर नजर रखेगा?

निवेशक अब फेड की आगामी मौद्रिक नीति, नए आर्थिक आंकड़ों, महंगाई के रुझान और केविन वार्श के आगे के बयानों पर नजर रखेंगे, क्योंकि यही ब्याज दरों और वित्तीय बाजारों की दिशा तय करेंगे।

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Macroeconomic Stance: Inflation Risks and Policy Independence

Addressing the forum on critical macroeconomic pressures, Fed Chair Warsh delivered clear assertions regarding the domestic price outlook and the operational boundary of the central bank:

• Declining Inflation Risks: Warsh stated that inflation expectations and inflation risks have noticeably come down in recent weeks. However, he strongly reiterated the Federal Reserve’s unwavering commitment to achieving its statutory 2% goal.
• Price Stability Guarantee: Targeting market skeptics, Warsh noted, “If there were people in households or the business sector, in the financial markets, who thought that this central bank was going to be comfortable with an inflation objective above 2%, well, I guess they’d be disappointed: We’re going to deliver price stability in the U.S.”
• Defending Central Bank Autonomy: When challenged by the session moderator, CNBC anchor Sara Eisen, regarding the explicitly stated interest rate views of President Donald Trump, Warsh emphasized institutional continuity, declaring, “We’ve been an independent central bank for a very long time. We’re going to be an independent central bank at this moment, and you’re going to see no changes on that.”

The AI Capital Boom: Inflationary Asset or Supply Catalyst?

The high-level policy panel shifted focus onto the sweeping commercial integration of artificial intelligence (AI) and its structural impact on macroeconomic data.

Warsh noted that in the United States, the AI shock is leading to a prominent boom in front-end capital expenditures, primarily observable on the demand side. While remaining guarded on whether the tech boom is structurally inflationary, Warsh remarked that it remains the central bank’s prerogative to make that ultimate judgment.

He stated a strong preference for this localized capital expenditure surge over historical periods of financial engineering and corporate stock buybacks, expressing confidence that the heavy investments will eventually expand the supply side of the economy, carrying massive implications for future monetary policy.

Global Alignment: The Death of Forward Guidance

A notable point of strategic unity emerged during the panel session regarding the utility of steering financial markets via predictive policy signaling:

• Lagarde’s Regret: ECB President Christine Lagarde openly expressed a core regret regarding her tenure, stating she felt overly bound and compelled by rigid forward guidance in the past. Consequently, the ECB has shifted away from providing fixed paths for future rate moves.
• Warsh’s Clean Break: Chair Warsh, who completely renounced forward guidance during his debut June press conference, welcomed Lagarde’s alignment, stating, “So we have found common cause. It’s what President Lagarde said… After that answer, I love her,” drawing laughter from the Sintra audience.

The Peer Perspective

The global central banking cohort presented a mixed look at domestic data landscapes while reflecting on past structural support networks:

Bank of England Economic Outlook: Bank of England Governor Andrew Bailey clarified that near-term rate cuts are currently off the table for the United Kingdom. Bailey highlighted that the BoE is observing a softening domestic economy, characterized by a loosening labor market, slower activity metrics, and an opening output gap that materialized well before the recent outbreak of hostilities in the Gulf region.

The Powell Solidarity Legacy: The panel noted significant historical context: Warsh’s fellow panellists—Lagarde, Bailey, and Macklem—were all primary signatories to an unprecedented joint solidarity statement issued earlier this year backing former Fed Chair Jerome Powell during intense independence disputes with the Trump administration.

Underlying Legal and Policy Backdrop

The high-visibility Sintra gathering follows critical domestic developments affecting the Federal Reserve’s administrative core:

1. Supreme Court Decision on Governor Lisa Cook: The event comes just two days after the U.S. Supreme Court blocked President Trump’s bid to remove Fed Governor Lisa Cook in a 5-4 ruling. Chief Justice John Roberts noted that the administration failed to afford Cook required statutory procedural protections.
2. The June Fed Policy Baseline: At his debut policy meeting chaired on June 17, 2026, Warsh maintained U.S. benchmark borrowing costs steady in the 3.50%–3.75% range. Projections indicate nine of 19 policymakers still anticipate a necessary rate hike later this year to counter sticky inflation tracking above the 2% target.

FAQ’s

1. What was the significance of Kevin Warsh’s appearance at the ECB Forum?
Kevin Warsh made his first international appearance as U.S. Federal Reserve Chairman at the ECB Forum in Sintra, Portugal, joining leading central bankers to discuss inflation, interest rates, central bank independence, and the global economic outlook.

2. What did Kevin Warsh say about inflation and the Federal Reserve’s policy?
Warsh stated that inflation risks have eased in recent weeks but emphasized that the Federal Reserve remains fully committed to restoring inflation to its statutory 2% target and will not tolerate a higher long-term inflation objective.

3. How did Kevin Warsh respond to questions about Federal Reserve independence?
Warsh strongly defended the Federal Reserve’s independence, saying the institution has operated independently for decades and will continue to make monetary policy decisions without political influence despite public comments from President Donald Trump.

4. What were Kevin Warsh’s views on artificial intelligence and the economy?
Warsh said the AI boom is driving significant capital investment in the U.S. economy. He believes these investments could eventually expand productive capacity, improve supply conditions, and influence future monetary policy, although their inflationary impact remains uncertain.

5. What is the Federal Reserve’s current interest-rate outlook?
Following its June 17, 2026 policy meeting, the Federal Reserve kept benchmark interest rates unchanged at 3.50%–3.75%. However, projections show that several policymakers still expect at least one additional rate hike later this year if inflation remains above the 2% target.

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