Arabic version: خطاب وورش يعيد تشكيل توقعات أسعار الفائدة في سبتمبر
According to Cnbc, markets sharply raised expectations for a September interest rate increase after Federal Reserve Chairman Kevin Warsh delivered a keynote speech Friday at the central bank’s Jackson Hole, Wyoming, symposium. Before the speech, markets saw little likelihood of an increase before at least December; afterward, they assigned a high probability to action when the Federal Open Market Committee meets Sept. 15-16.
Odds of a move at that meeting rose to 66.1% on Monday, nearly twice their level before Warsh spoke, according to CME Group’s FedWatch. Warsh said recent soft inflation readings do not show that “underlying trends have meaningfully improved.” He said policymakers must be confident inflation is moving toward their objective “clearly and at sufficient speed,” or “we have work to do.”
Some economists and officials questioned whether the market reaction was warranted. Treasury Secretary Scott Bessent said core inflation had remained “very, very restrained” and argued that policymakers traditionally do not raise rates into a supply shock unless they see second- or third-order effects. Citigroup economist Andrew Hollenhorst said Warsh’s comments were only marginally more hawkish than usual and pointed to cooler inflation and softer hiring since the July FOMC meeting.
The Fed will receive additional labor, housing, consumer spending and inflation reports before its decision. The July personal consumption expenditures inflation reading showed headline inflation at 3.7% and core inflation at 3.3%, while a Dallas Fed measure excluding extremes held at 2.3%. Three straight weak nonfarm payrolls reports have also raised questions about labor-market momentum.
David Kelly, chief global strategist at JPMorgan Asset Management, said the employment picture could discourage rate increases, arguing markets may have been premature in assigning roughly a 60% probability to a September hike. Bank of America economist Aditya Bhave, however, said Warsh had raised the bar for standing pat and that, absent a material downside surprise, the chairman faces pressure to deliver a September increase.
