Archive · 29 Aug 2026
Warsh Signals Possible Rate Hikes as Inflation Stays Above Target
Federal Reserve Chair Kevin Warsh said prices in the United States are still rising too quickly.
The Fed wants inflation to settle at 2%.
Its preferred inflation measure was 3.7% in July.
Warsh said inflation improved a little in June and July, but the deeper problem has not clearly improved.
He suggested that the Fed might raise interest rates if inflation does not slow enough.
Higher rates can make loans more expensive and encourage people and businesses to spend less.
Warsh did not say that rates will definitely rise at the Fed’s September meeting.
Many analysts expect no change in September, but investors see a meaningful chance of a hike and expect one by December.
Warsh also said he does not want to promise markets what the Fed will do in advance.
Federal Reserve Chair Kevin Warsh said rates may need to rise if inflation does not move clearly and quickly toward the 2% target.
Warsh said inflation has cooled recently, but underlying price pressures have not meaningfully improved.
The Fed’s preferred inflation measure was 3.7% in July, while 54% of tracked goods and services rose at least 3% over the past year.
Warsh did not signal an imminent September hike; analysts generally expect rates to remain unchanged, while futures indicated roughly even odds of a September increase and expectations of a hike by December.
Two-year Treasury yields rose after the speech, while longer-term yields remained elevated amid concerns about government deficits and technology companies’ AI borrowing.
- Who
- Federal Reserve Chair Kevin Warsh and Federal Reserve policymakers.
- What
- Warsh said the central bank may need to raise interest rates if inflation does not move toward its 2% target.
- When
- Friday; one source identifies the publication date as August 28, 2026. The Fed’s next meeting is scheduled for September 15-16.
- Where
- The remarks were delivered at the Federal Reserve’s annual conference in Jackson Hole, Wyoming.
- Why
- Inflation remains above the Fed’s 2% target, and Warsh said it may not return to that target without further action.
Case for Higher Rates
Case for Caution
Inflation progress
Case for Higher Rates
Warsh said recent cooling did not demonstrate meaningful improvement in underlying inflation and argued that inflation is unlikely to return to 2% on its own.
Case for Caution
Inflation eased in June and July, and some newer data showed subdued core inflation, weaker retail sales, and softer employment conditions.
September decision
Case for Higher Rates
Warsh indicated that current interest rates may not be restrictive enough because consumer spending and investment in AI equipment and infrastructure remain strong.
Case for Caution
Warsh did not say a September increase was imminent, and most analysts expected the Fed to hold rates steady at that meeting.
Policy communication
Case for Higher Rates
Some economists wanted Warsh to provide more detail about his policy views to reassure markets about the Fed’s commitment to fighting inflation.
Case for Caution
Warsh defended avoiding forward guidance, arguing that explicit commitments could reduce the Fed’s flexibility and that markets should form their own views about the economy.
- July inflation
- The Fed’s preferred inflation measure stood at 3.7% in July.
- Fed target
- The Federal Reserve’s inflation target is 2%.
- Broad price increases
- Fifty-four percent of tracked goods and services recorded price increases of at least 3% over the past year, compared with 32% on average in the two decades before the pandemic.
- Next policy meeting
- The Federal Reserve is scheduled to meet September 15-16.
- September market outlook
- Most analysts expect rates to remain unchanged, while futures pricing after the speech showed roughly a 50% chance of a September hike, up from about one-third or 36% beforehand.
- December outlook
- Investors were betting on a rate increase by December, according to CME FedWatch futures pricing.
- Treasury yields
- The 30-year Treasury yield recently reached its highest level in 19 years; reports differed on the immediate move in the 30-year yield, describing it as either little changed or down two basis points.
