US Federal Reserve president expresses concern over high inflation

Federal Reserve President Kevin Warsh issued a warning that interest rates could increase if progress in curbing inflation falters. Speaking at the annual symposium in Jackson Hole, Wyoming, Warsh described inflation as "elevated" and cautioned that current summer data, while better than expected, does not indicate significant improvement in underlying trends.

Warsh avoided committing to specific future rate adjustments, stating that the Fed must be certain that underlying inflation is clearly approaching its target at a sufficient pace. "Otherwise, we will have work to do. That is our job, our mandate, and our responsibility," he asserted, underscoring the Fed's commitment to its objectives.

Following his remarks, stock market indices saw gains, and Treasury bond yields rose sharply, with the two-year note reaching its highest level since late July. Market participants increased the probability of a rate hike at the September meeting to 55.7%, a significant jump from the previous day.

Despite his concerns about inflation, Warsh expressed confidence in the U.S. economy, describing it as having "strengthened." He pointed to the benefits of artificial intelligence and attributed the slowdown in hiring to a stagnation in the labor supply. Warsh also advocated for a more discreet Federal Reserve, stating that market participants should not primarily rely on the Fed for guidance on future operations.