Warsh's inflation warning changes Fed rate outlook
Federal Reserve Chair Kevin Warsh put inflation back at the center of the monetary policy debate on Friday, warning that the central bank could have more work ahead if price pressures fail to ease.
Speaking at the Fed's annual Jackson Hole symposium on Aug. 28, Warsh said underlying inflation needs to show clear progress toward the central bank's 2% target.
"We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do."
Warsh said recent data "do not tell me that underlying trends have meaningfully improved," noting that inflation, measured by the Fed's preferred Personal Consumption Expenditures index, remained at 3.7% in July.
The remarks were among Warsh's clearest acknowledgments yet that higher rates could still be needed.
He also said "short-term interest rates are the predominant tool" for fulfilling the Fed's mandate, while stopping short of offering explicit forward guidance.
Polymarket odds of a Fed rate hike in 2026 jumped to about 69% , from roughly 56% earlier in the day , according to the prediction market.
Reuters also reported that expectations for a September rate hike increased after the speech, while the two-year Treasury yield reached its highest level in about a month.
The shift spilled into crypto markets, with the total cryptocurrency market capitalization falling about 0.9% to $2.65 trillion .
Higher interest rates can weigh on crypto and other risk assets because they raise borrowing costs and increase the returns available from lower-risk investments.
At the time of writing, Bitcoin traded at $79,432, down 1.02% over 24 hours. Ether was at $2,507, down 0.16%, while XRP traded at $1.43, down 1.95% as per data by Decibel.
