Federal Reserve chairman Kevin Warsh used his Kevin Warsh Jackson Hole speech to warn that policymakers will ‘have work to do’ if they are not confident that inflation is easing for American households. Speaking at the annual Jackson Hole Economic Policy Symposium in Wyoming, Warsh said the most recent inflation readings looked better than expected over the summer, but did not show that the current picture had ‘meaningfully improved’.
The symposium brings together central bankers, government officials and academics from around the world each year to discuss interest rates, inflation and broader economic challenges. It was Warsh’s first appearance at the gathering since taking over as Fed chairman.
What Warsh actually said about inflation
Prices rose 3.4% in the year to July, above the Fed’s 2% target, and Warsh was direct about what that means for policy. ‘Given prices were rising by more than 2% on an annual basis, the Fed’s predominant focus right now should be on prices,’ he said. His stated standard was equally clear: ‘We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.’
The speech stopped well short of a firm commitment on rates, but the message was hard to miss. If policymakers do not believe inflation is on a convincing downward path, rate rises remain on the table. The Fed’s next interest rate decision is scheduled for 15–16 September.
According to the Federal Reserve, broad inflation measures have fallen significantly from their 2022 peaks, but progress over the past two years has been modest. That slow pace of improvement is precisely why Warsh declined to offer reassurance that the job is done.
Kevin Warsh Jackson Hole speech and the future of forward guidance
One of the more pointed passages in the Kevin Warsh Jackson Hole speech concerned the practice of ‘forward guidance’, in which central banks signal to financial markets where interest rates are likely to go next. The approach became common after the 2008 financial crisis, but Warsh suggested it had ‘overstayed its welcome’.
‘Oversharing policy deliberations and overcommitting to future decisions can lead markets, businesses, and households astray,’ he said. He also argued that the practice inhibited the Fed’s ‘freedom to make the right calls when it’s time to decide’. He asked that his remarks not be treated as forward guidance themselves, a plea that underlined just how deliberately he is trying to keep markets guessing.
Interest rates were left unchanged between 3.5% and 3.75% in July, the fifth consecutive meeting at which the Fed held firm. Ongoing conflict between the US and Iran has pushed global oil prices higher, adding to inflationary pressure and making the Fed’s task harder.
Higher oil prices have also unsettled bond markets. Investors have demanded greater returns, pushing up borrowing costs for the US government and large corporations alike. Those higher costs ripple through to mortgages, car loans and credit cards for ordinary Americans.
The broader debt picture adds another layer of pressure. The spike in interest payments has driven US national debt past $40 trillion. The figure has doubled in a decade across successive administrations. According to the Congress Joint Economic Committee, the debt is rising by about $90,000 every second, or $7.8 billion a day.
On the fiscal side, Treasury Secretary Scott Bessent said the government would buy back more debt in an effort to lower borrowing costs. Markets responded briefly but the effect proved short lived.
Warsh was appointed by President Donald Trump in May. Trump pushed Warsh’s predecessor, Jerome Powell, to cut rates, and has made clear he expects Warsh to deliver lower borrowing costs for Americans. Rate rises work in the opposite direction, slowing price increases by making borrowing more expensive and encouraging consumers to spend less, while also offering better returns to savers. Whether Warsh raises rates or holds will become clearer when the Federal Open Market Committee meets on 15–16 September.
