Fed Rate Hikes May Be Needed, Warsh Says at Jackson Hole

Fed rate hikes may be needed in the coming months, Chair Kevin Warsh said Friday, warning that inflation remains too high even after recent signs of cooling.

Warsh sends his clearest signal yet

In his first high-profile speech at the Fed’s annual conference in Jackson Hole, Wyoming, Warsh acknowledged that recent inflation reports show some cooling, but “they do not tell me that underlying trends have meaningfully improved.”

“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” Warsh said. “Otherwise, we have work to do.”

High stakes for a new Fed chair

Warsh, who replaced Jerome Powell on May 22, faced high stakes with the speech after questions swirled on Wall Street about his commitment to fighting inflation. Those concerns may have contributed to rising bond yields in recent weeks.

Warsh has resisted giving what analysts call “forward guidance” on whether the Fed will hike, cut or hold rates, arguing it limits the central bank’s flexibility. Still, some economists say he could share more of his views on policy without committing to a specific path.

Rates aren’t holding back the economy, Warsh says

Warsh pointed to robust business investment in AI equipment and infrastructure, along with strong consumer spending, as evidence that interest rates currently aren’t restraining economic activity. As a rule of thumb, rates typically need to be high enough to limit borrowing and spending in order to cool inflation.

The Fed next meets September 15-16, and Warsh’s remarks don’t necessarily mean the central bank will raise rates at that meeting.

A closely watched debut on the world stage

Warsh has kept a lower profile than his predecessors, but Friday’s speech was one of the most closely watched Jackson Hole addresses in years. His last public appearance, a press conference in late July, sowed confusion about his willingness to raise rates, sending longer-term borrowing costs higher on fears inflation could worsen.

Most analysts expect the Fed to hold rates steady in mid-September, but Wall Street investors are betting on a December hike, according to futures pricing tracked by CME FedWatch. Inflation cooled in June and July after spiking in May on higher gas prices, but it remains above the Fed’s 2% target — at 3.7% in July by the central bank’s preferred measure.

Trump’s pressure campaign continues

President Donald Trump, who appointed Warsh, has continued pushing for lower interest rates while defending his pick, even as he criticizes other Fed officials who back higher rates. Trump has also renewed efforts to remove Fed Governor Lisa Cook, appointed by former President Joe Biden; her removal would let him appoint a majority of the seven-member board. Trump tried to fire her last year but was temporarily blocked by the Supreme Court.

Longer-term interest rates have risen steadily in recent weeks amid growing U.S. government deficits and heavy borrowing by tech firms building AI infrastructure. The 30-year Treasury yield hit its highest level in 19 years last week, prompting an unusual effort by Treasury Secretary Scott Bessent to buy back bonds and push yields lower.