New Federal Reserve Chairman Kevin Warsh used his Jackson Hole debut to present seven guiding principles for monetary policy, including a firm commitment to a 2% inflation target. PCE inflation, the Fed’s preferred price gauge, currently stands at 3.7% year-over-year, with a six-month annualized rate reaching 4.1%, well above the target. Warsh also noted that business capital expenditure is growing at approximately 9% on an annualized basis, with more than half linked to artificial intelligence investments. Bond markets are now pricing in elevated odds of a rate hike as early as September, with the Fed indicating that current financial conditions show few signs of restraint despite persistent inflation.
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