“The 2% PCE inflation target is firm and fixed,” Fed Chair Kevin Warsh said in his Jackson Hole keynote. Summer inflation data improved, he said, but underlying trends had not meaningfully changed. The Fed still has work to do unless inflation returns to target clearly and at sufficient speed.
Why it matters
Warsh said the Fed’s predominant focus should be on prices. Labor markets remain stable and consistent with full employment, while broad financial conditions are not restrictive, leaving policymakers room to keep the focus on inflation before changing rates.
Market impact
The remarks reinforce a hawkish rate outlook. A “good majority” favored waiting before changing interest rates in July, setting a high bar for an easing move. Markets will look for a clear and sufficiently fast return to 2% before the policy signal softens.
Frequently asked questions
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What inflation target did Warsh call “firm and fixed”?
Warsh described the Fed's 2% PCE inflation target as “firm and fixed.”
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How did Warsh assess the summer inflation improvement?
He said summer inflation data improved, but underlying trends had not meaningfully changed.
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What did Warsh say about labor-market conditions?
He said labor markets remain stable and consistent with full employment.
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How did he describe broad financial conditions?
Warsh said broad financial conditions are not restrictive.
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What did a good majority favor in July?
A good majority favored waiting before changing interest rates in July, setting a high bar for an easing move.
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