New Federal Reserve Chair Kevin Warsh delivered his first speech at the Jackson Hole 2026 symposium, signaling clearly that the Fed will prioritize controlling inflation and may raise interest rates at the September FOMC meeting. Warsh stated that the global economy is entering a new era driven by AI, which will enhance growth potential, but he remains concerned that inflation is too high. He noted that 54% of goods and services in the PCE index still have price increases above 3%, significantly higher than the pre-COVID period. He also announced reforms to the Fed's operations, reducing the role of forward guidance and emphasizing flexibility in making decisions based on actual data. Meanwhile, short-term interest rates remain the primary tool for achieving the Fed's dual mandate.
Fed signals possible rate hike, raising the policy rate.
Expected rate hike pushes long-term yields up, lowering bond prices.
