US Fed chair warns inflation progress insufficient, hints at rate hikes

In a closely watched speech in Jackson Hole, Kevin Warsh underscores US Fed’s commitment to tackling inflation, with rate hikes possibly on horizon.United States Federal Reserve Chairman Kevin Warsh said the US central bank will “have work to do” if policymakers are not confident that underlying inflation is returning to its 2 percent target.On Friday, Warsh stressed that financial conditions do not appear restrictive enough, the closest he has come to acknowledging that interest rate hikes may be needed to ease price pressures.Recommended Stories list of 4 itemslist 1 of 4Parents who lost children to social media harms question Meta settlementlist 2 of 4Canada welcomes US shift on French language discoverability in trade talkslist 3 of 4Iran says it will name its terms for reopening Strait of Hormuzlist 4 of 4Singapore’s plans to clear forest for homes lead to rare public protestsend of list“Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” Warsh said in an address at the Federal Reserve’s Jackson Hole economic symposium in the US state of Wyoming.Warsh did not suggest a timeline for rate hikes and stressed that his comments should not be taken as “forward guidance”.However, it is becoming increasingly probable that a rate hike could be on the way. CME Group’s FedWatch, which tracks the likelihood of monetary policy decisions, shows a 57.4 percent chance that the central bank will raise rates by 25 basis points at its next meeting in mid-September.“Short-term interest rates are the predominant tool to achieve the dual mandate,” Warsh said in his remarks on Friday.“It’s the Fed’s job to make sure that inflation expectations do not get unanchored.”Warsh also addressed the Personal Consumption Expenditures Price Index (PCE), the central bank’s preferred metric for gauging the rate of inflation, which remained at 3.7 percent on an annual basis as of July.“Progress over the past two years has been modest,” Warsh said. He added that the data does “not tell me that underlying trends have meaningfully improved”.