TLDR
- Fed Chair Kevin Warsh gave a hawkish speech at Jackson Hole, signaling more rate hikes ahead
- Barclays now expects 25-basis-point rate hikes in both September and December
- Warsh said he would be “hard pressed” to call financial conditions restrictive
- Core PCE inflation rose 0.25% in July, pushing Barclays to raise its Q4 forecast to 3.3%
- Fed’s Hammack also called for immediate rate hike action, expecting inflation to end the year near 3%
Federal Reserve Chairman Kevin Warsh delivered a hawkish speech at Jackson Hole over the weekend, raising expectations that the Fed will raise interest rates at least twice more this year.
🚨 BREAKING:
🇺🇸 Fed Chair Kevin Warsh sounded hawkish at Jackson Hole
– Inflation is still too high
– The 2% target remains the priority
– The economy is still strong
– Rates may not be restrictive enough
– Rate cuts could be harder to come byBottom line: September rate-cut… pic.twitter.com/7UuqM0vqZy
— ardizor 🧙♂️ (@ardizor) August 28, 2026
Barclays economists, led by Jonathan Millar, now expect a 25-basis-point rate hike in September and another in December following the speech.
Warsh’s Key Statements
Warsh described the economy as having strengthened and said labor markets are consistent with full employment. He said he would be “hard pressed to describe broad financial conditions as restrictive.”
He also pointed to healthy consumer spending, strong capital investment, and easy credit conditions as signs the economy does not need relief from high rates.
On inflation, Warsh was especially firm. He called the Fed’s 2% PCE target a “firm, fixed target” and said inflation is “neither self-executing nor necessarily mean-reverting.”
He warned that policymakers must be confident inflation is moving toward target “clearly and at sufficient speed,” or else “we have work to do.”
Warsh relied on six- and twelve-month inflation measures in his assessment rather than the three-month measures Barclays uses, which currently look more favorable.
Inflation Data Adds to Pressure
Core PCE prices rose 0.25% in July, coming in about 6 basis points above Barclays’ forecast. The bank raised its fourth-quarter core PCE forecast by 0.1 percentage point to 3.3%.
Despite the firm July reading, core PCE inflation did slow to a 3.0% three-month annualized pace in July, down from 3.9% in the prior period.
Revised data showed consumer spending grew at a 3.5% annualized rate in the second quarter, and private domestic final purchases grew at 4.2%, the strongest pace since early 2023.
Barclays still expects demand to slow in the second half of the year, noting consumer spending was flat in July.
Warsh repeated his opposition to traditional forward guidance, describing his approach as “a discipline, not a decision.” But Barclays said his overall message “leaves little ambiguity about the direction of travel.”
Hammack Also Calls for Hikes
Fed Governor Beth Hammack, who voted for a rate hike at the last meeting, echoed Warsh’s tone. She called for immediate action on rate hikes and warned that waiting could create more economic pain.
Hammack expects inflation to finish the year around 3%, well above the 2% target, and does not view current financial conditions as restrictive.
The Bureau of Labor Statistics also released an early estimate of the annual payroll benchmark revision at minus 79,000 jobs, covering April 2025 to March 2026. The revision is smaller than in recent years.
Markets now price September as close to a coin-flip for a rate hike following Warsh’s remarks.
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