The annual economic symposium at Jackson Hole, Wyoming was held last week. It was Kevin Warsh’s first appearance as the Chair of the Federal Reserve. His statement indicated the Fed is not done with their fight to contain inflation, and recent price readings have not convinced him the situation is improving.
Warsh did not say that rates are poised to rise next month but described an economy that is showing few signs of restraint under the current interest rates, which are set in the range of 3.5 to 3.75 percent. The inflation data in the summer was better than expected, according to Warsh, but it did not convince him the underlying price pressures have abated.
In the past, the Jackson Hole conference was seen as an occasion where Fed chairs have foretold shifts in the FOMC’s strategy. Though Warsh has said he does not feel the Fed needs to projected its next moves.
The core PCE index, which is the Fed’s preferred inflation gauge, for July was released last week; it rose 3.3 percent, running well ahead of the Fed’s 2 percent target. The odds of a rate hike in September have risen to almost 50 percent; before Warsh’s speech 70 percent of economists believed rates would be held firm at the Fed meeting on September 15-16.