Investors are heading into the Jackson Hole symposium with one question: How far is Federal Reserve Chair Kevin Warsh willing to go to prove that the central bank is still serious about inflation? According to a Reuters report, traders are pricing in no change in borrowing costs at the Fed’s September meeting but see about a 70% chance of at least a 25-basis-point rate increase by December as Middle East tensions keep oil prices elevated and inflation remains sticky.
The dollar has found support from those rate expectations, though the currency's gains could be capped if the Fed avoids further hikes this year. That has made Warsh's Friday speech the main event for bonds, currencies and gold.
