Warsh: ‘Inflation is too high; the Fed still has work to do’
The Federal Reserve Chair’s speech at Jackson Hole appears to pave the way for an interest rate rise as early as September
From New York Luca Veronese
Aggiungi Il Sole 24 Oreai preferiti su Google
‘High and persistent inflation is a growing cause for concern’, ‘the price data released this summer were better than expected, but do not indicate a significant improvement in underlying trends’. And furthermore: ‘We must be certain that we are making progress towards our objective, clearly and with sufficient speed. Otherwise, when it comes to inflation, we have work to do: this is our task, our mandate and our responsibility.”
In Jackson Hole – during his debut as Fed chairman at the prestigious central bankers’ summit – Kevin Warsh said perhaps more than even his colleagues on the US central bank’s board had expected. However, the remarks by the chairman appointed by Donald Trump did not entirely convince analysts and only partially reassured the markets.
“Warsh is giving the market what it wants. He acknowledges that inflation remains an unresolved issue, but – as Oliver Pursche of Wealthspire explains – he isn’t giving too much away about the Fed’s future moves. That’s the best we could have hoped for from him.” “We’ll see how the situation develops; I get the impression I’ve heard the same line from Warsh for the fourth, perhaps even the fifth time. He reiterates that they will focus on inflation, whilst refraining from providing any forward-looking guidance, but then says to let the market take its course, that it’s fine as it is,” says Eugene Epstein of Moneycorp.
The markets had been completely taken by surprise by Warsh’s lack of explanation after the FOMC had decided, at its last meeting in July, to leave interest rates unchanged within a range of 3.5 per cent to 3.75 per cent. At Jackson Hole, during the annual gathering held in Wyoming, Warsh appeared to offer further insight. Inflation is still ‘too high’ and ‘current financial conditions can hardly be considered “restrictive”’, he explained, suggesting that a rise in key interest rates, starting at the September meeting or in any case by the end of the year, might already be on the cards. However, he also said he could confirm “a commitment to a rigorous approach, but not to a specific decision”.
He also hedged his bets, in a passage that was as vague as it was close to the populist base of the Trumpian right. ‘If the Fed gets it wrong on inflation and misjudges the economy, who stands to lose the most? Not the financial elite. It is working Americans who have to cope with excessively high inflation or jobs that suddenly become less secure.’
