Fed’s Warsh open to September rate hike if inflation rises

Federal Reserve Governor Kevin Warsh has indicated a potential openness to support a rate hike in September if inflation shows signs of reacceleration. Speaking at a recent event, Warsh emphasized the conditional nature of his support, contingent upon inflation metrics moving higher. This stance aligns with the Fed’s earlier projections which suggested a sustained inflationary outlook, with PCE inflation forecasted at 3.6% for 2026. Market participants appear to be interpreting these comments as an indication that the Fed may maintain or even increase rates, decreasing the likelihood of rate cuts in the upcoming meetings.

Key Takeaways

• Warsh’s comments on supporting a rate hike if inflation increases appear to align with a more cautious monetary policy approach.
• Market pricing suggests participants view the possibility of rate cuts in the upcoming Fed meetings as less likely.
• Current market odds for a “Pause–Cut–Pause” scenario from July to October have decreased, consistent with Warsh’s remarks.

What to Watch

Market participants will be closely monitoring upcoming inflation reports, particularly any core CPI or PCE data above 3.0%, which could further influence Fed decision-making. Additionally, the September FOMC meeting will be pivotal, as any indication of future rate cuts could shift current market expectations. Watch for any further statements from Fed officials that might provide clarity on the Fed’s policy direction in light of evolving economic conditions.

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Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.