Rate-hike expectations rise on Warsh speech at Jackson Hole

Federal Reserve Chair Kevin Warsh spoke at the Jackson Hole symposium, expressing concerns that underlying inflation may not be returning to its target of 2%. This marks one of the closest he has come to acknowledging that interest rate hikes may be necessary to curb price pressures. As a result, short-term Treasuries experienced a sell-off, with the 2-year Treasury yield rising 6.6 basis points to 4.29% and the 10-year yield remaining flat at 4.672%.

The 30-year yield also saw a slight decline of 3 basis points to 5.16%. U.S. stocks saw minimal movement, while the U.S. dollar index rose 0.4% to 99.55, indicating expectations of rate increases. Market expectations for a rate hike next month increased to 46%, up from 35% the previous day. Warsh's speech was described as more hawkish than previous remarks but still lacked substantive guidance.

Analysts noted that while the Fed may be serious about hiking rates, the current data and inflation numbers do not provide convincing evidence for an immediate action.