Rate hikes may be coming amid inflation, new U.S. Fed chief signals

Federal Reserve Chair Kevin Warsh has signaled that interest rate hikes may be necessary to combat high inflation, during his first significant speech at the Fed’s annual conference in Jackson Hole, Wyoming. While recent U.S. data show a slight cooling of inflation, Warsh cautioned that "underlying trends have not meaningfully improved."

He emphasized the need for confidence that inflation will move towards the Fed's two percent target at a sufficient pace. The Fed chair, who succeeded Jerome Powell on May 22, has been cautious about providing "forward guidance" on future rate changes, arguing that it limits the Fed's flexibility. However, he did note that current interest rates are not restricting economic activity, pointing to strong business investment in AI equipment and robust consumer spending.

Warsh highlighted that inflation remains above the central bank's target, with 54 percent of tracked goods and services seeing price increases of three percent or higher. The Fed is expected to meet on September 15-16 to discuss potential rate changes.