Economist Paul Krugman said Federal Reserve Chairman Kevin Warsh's first Jackson Hole speech sounded "utterly conventional," suggesting that monetary policy may not change much under his leadership despite promises of a break from tradition. Warsh reaffirmed the Fed's 2% inflation target and stuck with the Personal Consumption Expenditures Index as the preferred gauge, calling the target "firm" and "fixed." He emphasized that inflation remains the bigger problem, with July PCE inflation at 3.7% year over year, and described the labor market as broadly consistent with full employment. Following the speech, the probability of a September rate hike climbed to roughly 55%, up from about one-third the previous day. Krugman characterized the message as "tight money until we see a lot better data," indicating that while Warsh may alter communication strategies, interest rate policy appears set for continuity rather than revolution.
NVIDIA CorporationRate hike probability rises to 55% after Warsh's hawkish speech, implying higher policy rate.
Hawkish Fed stance and rate hike odds push yields up, lowering bond prices.
