Fed Chair Warsh Signals Inflation Fight Not Over at Jackson Hole, Sending September Hike Odds Above 55%

Federal Reserve Chair Kevin Warsh delivered a hawkish speech at the Kansas City Fed's annual Jackson Hole Economic Policy Symposium on August 28, warning that inflation progress has not been convincing and signaling the Fed may still have more work to do. Markets moved sharply in response: odds of a September rate hike rose from roughly 35% before the speech to as high as 59%, according to Yahoo Finance, with CME FedWatch showing 57% of traders pricing in a 25-basis-point hike to the 3.75% target range. Polymarket put the probability at 48% shortly after the hawkish comments emerged, while CNBC described the September decision as now a coin flip.

Treasury yields surged, with the policy-sensitive 2-year note climbing nearly 8 basis points to 4.31%, its highest level since late July. Stock indexes initially climbed after digesting the remarks. At least one analyst, Heather Long of Navy Federal Credit Union, said a hike was unlikely to come in September specifically but probable by October or December.

The speech marked Warsh's first keynote address as Fed chair at Jackson Hole, and investors had been waiting for clearer guidance on the Fed's direction for the remainder of the year.