Hawkish Kevin Warsh hints Fed will raise rates if inflation does not fall soon

{"text":[[{"start":9.92,"text":"Federal Reserve chair Kevin Warsh has signalled the US central bank is prepared to raise rates if inflation does not fall soon, as he warned that persistently high price growth had become “more concerning”."}],[{"start":22.24,"text":"Warsh said in his address at the Kansas City Fed’s Jackson Hole symposium that rate-setters would have “work to do” if price rises across the world’s biggest economy did not ease shortly, sparking renewed bets on Wall Street for rate rises."}],[{"start":36.24,"text":"“The Fed’s predominant focus right now should be on prices,” Warsh said in remarks that provided his most detailed account yet of how he views current US economic conditions."}],[{"start":45.76,"text":"Warsh described the labour market as broadly robust but warned that “on the price-stability side of our mandate, the numbers are more concerning”."}],[{"start":53.92,"text":"His address comes just months before crucial midterm elections. Donald Trump, who nominated Warsh for the top Fed job, has relentlessly lobbied for lower borrowing costs and repeatedly criticised Jay Powell, the previous central bank head, for not sharply reducing them."}],[{"start":69.96,"text":"Warsh said on Friday the Fed had missed its 2 per cent goal for 65 months — and signalled that, without progress soon, the central bank would need to raise interest rates from their current level of between 3.5 and 3.75 per cent."}],[{"start":83.84,"text":"“Here is my standard: we must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” the Fed chair said. “Otherwise, we have work to do.”"}],[{"start":95.08,"text":"Warsh also noted that the Fed’s preferred PCE price index was running at a 3.7 per cent annual rate and a 4.1 per cent six-month annualised pace in July."}],[{"start":105.26,"text":"The odds of a rate increase at the Fed’s next meeting in September jumped to 62 per cent following the speech, from 35 per cent the previous day, according to CME Group data."}],[{"start":115.853,"text":"US short-term Treasury yields, which reflect expectations for monetary policy, jumped following Warsh’s remarks. The two-year yield rose as much as 0.11 percentage points to 4.34 per cent."}],[{"start":129.412,"text":"The US dollar was up 0.5 per cent against a basket of six peers."}],[{"start":133.16,"text":"“It is a hawkish speech,” said Priya Misra at JPMorgan Asset Management, adding that Warsh was “making a forceful statement that [policymakers are] committed to price stability”."}],[{"start":144.4,"text":"Matthew Amis, investment director at Aberdeen, said the speech “sets up a September meeting where if they don’t hike, credibility will take another bashing”."}],[{"start":152.68,"text":"Warsh had come under pressure from investors to spell out what it would take for him to back a rate increase after saying little about his view on economic conditions — and how the Fed might respond to them — at the press conference that followed the Federal Open Market Committee’s July vote."}],[{"start":167.16,"text":"Misra described Friday’s remarks as “a forceful pushback to what I think was miscommunication at the July press conference . . . And so I’m seeing today as the clean-up act”."}],[{"start":null,"text":"

"}],[{"start":178.52,"text":"While Warsh was seen as an inflation hawk during his previous stint at the Fed from 2006 to 2011, his appointment by Trump has raised doubts about his commitment to bring inflation under control."}],[{"start":190,"text":"Marc Sumerlin, founder of Evenflow Macro, said Warsh had “cleared the bar” and delivered a speech with “real substance”."}],[{"start":197.16,"text":"The Fed chair said there were few signs that rates were at a level that was depressing US growth, adding that “on balance, I would be hard pressed to describe broad financial conditions as restrictive”."}],[{"start":208.96,"text":"He also said the Fed remained firmly committed to its 2 per cent inflation target, measured by the PCE price index, describing it as “a firm, fixed target”."}],[{"start":219.12,"text":"Additional reporting by Emily Herbert in London, Harriet Clarfelt and George Steer in New York and Myles McCormick in Dublin"}],[{"start":231.4,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787965182_9860.mp3"}