Kevin Warsh, the new Federal Reserve chairman, delivered his inaugural keynote at the Jackson Hole conference, breaking a month of silence. He maintained his critical stance on forward guidance, stating the practice has « outstayed its welcome » in normal times. On inflation, Warsh deemed the situation concerning, with the PCE index standing at 3.7% on a 12-month basis and 4.1% on a 6-month basis, well above the Fed’s 2% target. He reaffirmed that responsibility for 65 months of elevated inflation rests squarely with the central bank. Markets are pricing in a 57% probability of a 0.25% rate hike in September, bringing the federal funds rate to 3.75%.
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