Fed Chair Kevin Warsh Just Said the Quiet Part Out Loud About Inflation -- and History Says Investors Should Listen
The Federal Reserve is probably on the verge of a new rate hike campaign.
Fed Chair Kevin Warsh highlighted the broader implications of inflation during his Aug. 28 speech at the Jackson Hole gathering. He pointed out that 54% of the 199 items in the personal consumption expenditures (PCE) price index, the Fed's preferred inflation metric, had increased by more than 3% in the year leading up to summer 2026, compared to just 32% over the previous two decades before the pandemic.
This disparity poses challenges for S&P 500 companies, whose impressive growth in 2026 has been driven by profits that exceed the average. The market is likely to face the need to accommodate a Federal Reserve that may be inclined to charge businesses more for borrowing, potentially resulting in lower returns for investors purchasing assets.
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