Fed has 'work to do' if price rises don't ease for Americans, Warsh says

Federal Reserve Chair Kevin Warsh told investors that the central bank will have “work to do” if inflation does not show a clear and sustained decline. Warsh made the comments at the annual Jackson Hole Economic Policy Symposium in Wyoming, the world’s most important gathering for central bankers and economists, on Tuesday.

In his first speech as Fed head, Warsh said the most important focus remains on prices. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” he said. He cautioned that his remarks were not forward guidance on future policy, but a warning that the Fed could raise rates if it believes inflation is still too high.

U.S. inflation data for the year to July show a 3.4% rise in the consumer price index (CPI), above the Fed’s 2% target. The Fed‑preferred core personal consumption expenditures (PCE) inflation, which strips out volatile food and energy prices, was running at 3.7%. The latest figures, released on Tuesday, were slightly better than analysts had expected, but still well above the 2% goal.

Warsh’s comments come as the Fed’s policy rate has been held steady at 3.5% to 3.75% for five consecutive meetings, amid concerns that the U.S.–Iran conflict and rising global oil prices could fuel further inflation. The next Fed policy decision is scheduled for September 15‑16.

The speech also marked a shift in tone for the Fed’s communication strategy. Warsh said he does not want the Fed to “overshare policy deliberations and overcommit to future decisions,” a practice he said has “overstayed its welcome.” He argued that such signals can mislead markets, businesses and households and restrict the Fed’s ability to make the right decisions when the time comes.

Market reaction to the speech was swift. CME Group data showed the probability of a rate hike in September rising sharply after Warsh’s remarks, suggesting investors now view a hike as a realistic possibility earlier than previously expected. Analysts at Capital Economics said Warsh’s speech delivered a “far clearer – and hawkish – message” and opened the door to a hike if economic growth remains robust and core PCE inflation stays firm.

Higher oil prices have also pushed bond investors to demand higher yields, raising borrowing costs for the U.S. government and corporate borrowers. The resulting increase in interest payments has pushed the U.S. national debt past $40 trillion, a figure that has doubled over the past decade under both the Trump and Biden administrations. The Congress Joint Economic Committee estimates the debt is rising by about $90,000 every second, or $7.8 billion a day. Treasury Secretary Scott Bessent said the government would buy back more debt to try to lower borrowing costs, but the market reaction to that announcement was short‑lived.

President Donald Trump, who appointed Warsh in May, has repeatedly criticized his predecessor, Jerome Powell, for raising rates and has said that rate hikes “just keep the country down.” With the mid‑term elections approaching, voters remain concerned about affordability and the impact of higher borrowing costs on mortgages, car loans and credit cards.

The Fed’s mandate is to keep inflation near 2% while maintaining maximum employment. By raising rates, the Fed can slow the pace of price increases, reducing inflationary pressure. Higher rates can also benefit savers through better returns on deposits, but they can also dampen consumer spending and business investment. Whether the Fed will raise rates in September or keep the policy rate unchanged remains a key question for markets and the American public.