High inflation could lead to rate hikes: Fed chief

Federal Reserve Chair Kevin Warsh stated on Friday that the central bank may need to raise interest rates in the coming months to combat persistently high inflation. Speaking at the Fed’s annual conference in Jackson Hole, Wyoming, Warsh acknowledged that recent US data show inflation has eased slightly, but he emphasized that "underlying trends have not meaningfully improved."

Warsh insisted that the Federal Reserve must be confident that inflation is moving towards its 2 percent target at a sufficient pace. He reiterated his opposition to providing forward guidance on future policy decisions, arguing that it limits the Fed's flexibility. However, Warsh did note that interest rates are not currently constraining economic activity, citing strong business investment in AI equipment and infrastructure, as well as robust consumer spending.

The Fed will next meet on September 15-16, and Warsh's comments do not necessarily indicate an immediate rate hike. However, his remarks suggest that current rates may not be sufficient to bring inflation down to the Fed's target. Inflation data for the past year show that 54 percent of tracked goods and services have seen price increases of 3 percent or higher, a figure that has dropped from pandemic-era levels but remains well above pre-pandemic averages.