Every August, the world’s central bankers decamp to a mid-century lodge in the Grand Tetons for the Federal Reserve’ Jackson Hole symposium, where a single speech in Wyoming can swing markets around the globe.
On Friday, Kevin Warsh took center stage. In his first appearance there as Fed chair, he warned that inflation is still too high and made clear he stands ready to raise rates to bring it down if necessary. Warsh said the summer’s softer readings had not convinced him the underlying trend was improving, and the Fed has “work to do” unless inflation moves toward 2% “clearly and at sufficient speed.”
True to his approach that has rattled markets since he assumed the Fed Chair post, Warsh provided no specific forward guidance on rates either way. In July, his Fed held rates at 3.50 to 3.75%, and three of the Fed’s regional presidents pushed for a hike. In Jackson Hole, he appeared to side more with them.
The markets, especially precious metals, reacted to the takeaway that the next move in rates, if there is one, is up. This stance has been in play since crude oil prices first spiked during the onset of the Iran War, taking inflation figures up along with them.