Closing post
Time to wrap up…
The head of the US Federal Reserve has signalled to financial markets that US interest rates could be hiked if inflation does not fall soon.
In an eagerly-awaited speech at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming, Kevin Warsh warned that inflation remained too high, and should be the Fed’s “predominent focus”.
Warsh told his audience of economists and central bankers:
It’s the Fed’s job to make sure that inflation expectations do not get unanchored.
We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That’s our job . . . our mandate . . . and our charge to keep.
Warsh reiterated his opposition to ‘forward guidance’, arguing that a ‘quieter Fed’ will be better able to meet its objectives.
But investors responded by pushing up the chances of a quarter-point rise in US interest rates in September to almost 60%, from 35% yesterday.
Some analysts believe that Warsh may have ‘backed himself into a corner’ over a rate hike in September.
That, though, could irk Donald Trump who has been pushing for lower interest rates.
Steve Blitz, chief US economist at City firm TS Lombard, says:
“In sum, he is now set to tighten in September -- unless the data give him another month of wiggle room (which I still believe he is hoping for, if only to buy peace with the Administration through the election). The September market bet now depends on the data to come.
The yields on short-term US government bonds rose – another sign that a rate hike is seen as more likely.
Warsh also argued that artificial intelligence is providing the potential for “substantially higher growth” in future.
Here’s our full story:
Have a lovely weekend.
George Curtis, portfolio manager at TwentyFour Asset Management, suspects Kevin Warsh might feel forced to push for a rate hike in September, saying:
“Warsh delivered a hawkish Jackson Hole speech that was broadly similar in sentiment to the July presser.
It’s clear the Fed Chair does not plan to guide the market to any potential moves the FOMC might make in upcoming meetings, nor give the reaction function that might determine those moves. But the overriding message aside from this (which we could have predicted) was that in an environment of full employment and robust growth underlying inflation remains above target and progress towards 2% remains slow.
We fear Chair Warsh has backed himself into a corner where not hiking in September would drive a more significant loss in credibility, absent a material improvement in the data.”
Kevin Warsh’s speech has also lifted the US dollar against other currencies.
His hawkish words have caused the pound to slip by a third of a cent against the US dollar, to $1.356, while the euro has lost almost half a cent to $1.16.
Kathleen Brooks, research director at XTB, says:
The dollar index has been given a boost by Warsh, and is the top performing major currency on Friday, and is higher by 0.3%.
Markets see 55% chance of September rate hike
The financial markets now believe the Federal Reserve is more likely than not to raise interest rates next month, following Kevin Warsh’s speech.
Data provider CME’s Fedwatch tool shows that a rate hike in September is now seen as a 55.5% possibility, up from just 35.4% yesterday.
That suggests investors are heeding Warsh’s warning that there may be ‘work to do’ to tackle inflation (see earlier post).
Christian Hantel, portfolio manager at investment firm Vontobel, explains:
“Investors gained greater clarity from Fed Chair Kevin Warsh, who delivered a hawkish speech at this year’s Jackson Hole symposium. They can take reassurance from the Fed’s strong commitment to achieving its 2% inflation target and from Warsh’s acknowledgment that significant work remains to be done before that goal is reached.
At the same time, investors should expect a quieter US central bank when it comes to forward guidance. Rather than relying heavily on Fed communication, market participants may increasingly need to draw their own conclusions.
Warsh clears way for early rate hike, analysts say
Fed chair Kevin Warsh has ‘clawed back his credibility’ with his hawkish remarks today, says analysts at Capital Economics.
In a rapid-fire reaction, they have told clients:
Fed Chair Kevin Warsh’s speech at the Jackson Hole Symposium delivered a far clearer – and hawkish – message than his last press conference appearance, with Warsh arguing that the recent softer price data do not indicate that “underlying trends have meaningfully improved” and, absent more progress, the Fed has “work to do”.
If anything, that leaves the door open to a hike earlier than our current forecast of December, if the forthcoming price data are firm.
The market reaction backs this up – two-year US bonds have weakened, pushing up the country’s cost of short-term borrowing, a sign that the markets are anticipating rate hikes.
Long-term borrowing costs dipped a little – a sign that the markets are less worried that the Fed might lose control of inflation.
Reuters has the details:
Short-term Treasuries sold off in anticipation of rate increases as soon as next month, with the 2-year Treasury yield rising 6.6 basis points to 4.29%, its highest in a month. The 10-year Treasury yield was up 1 basis points at 4.682% and the 30-year Treasury yield was down 2 basis points at 5.17%.
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Warsh: Fed will have 'work to do' on high inflation unless prices ease
The US’s top central banker then warns that there are concerning signs that US inflation is running too high, meaning the Federal Reserve may have “work to do” unless price pressures ease.
In his speech to the Jackson Hole symposium today, Kevin Warsh points to signs that some prices are rising rather faster than the Fed’s 2% target.
Fed chair Warsh indicates that he is more concerned about inflation, than the labor market (where the unemployment rate remains low), declaring that “the Fed’s predominant focus right now should be on prices.”
He says:
Over the past 12 months, 54% of goods and services in the PCE basket showed price increases above 3%. This is well below the post-pandemic highs of about 77 percent, but it remains well above the level of 32 percent in the two decades that preceded the pandemic.
Looking over just the past six months, the conclusion is similar: Of goods and services in the PCE basket, 49 percent showed annualized price increases above 3 percent. Again, this is well below the post-pandemic highs but still quite elevated.
Warsh reminds his audience that the Fed’s monetary policy committee warned in July that inflation “remained too high”, and cautions that this summer’s inflation data has not shown him that underlying trends have meaningfully improved.
And in a hint that he could push for tighter monetary policy to squeeze out inflation pressures, Warsh says:
We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That’s our job . . . our mandate . . . and our charge to keep.
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Onto the state of the economy, where Kevin Warsh says he is “impressed” by its overall performance, which appears to have strengthened.
One indicator of strength is how well an economy holds up to shocks. On that score, both Main Street and Wall Street have been remarkably resilient.
Warsh's six principles for running the Fed
Kevin Warsh runs through six principles that will underpin his time leading the Federal Reserve.
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First, the Fed will “interrogate reality” to make sure it is not setting forward-looking policy based on stale or inaccurate data, or ‘yesterday’s news’
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Second, the Federal Reserve’s actions are intended to ensure that the aggregate demand side of the economy is broadly consistent with aggregate supply.
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Third: The Fed’s price-stability objective of 2%, as measured by the personal consumption expenditures (PCE) price index, is “a firm, fixed target”.
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Fourth, the Fed also bears responsibility for maximum employment.
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Fifth, short-term interest rates are the predominant tool to achieve the dual mandate, rather than using ‘unconventional policies’ to spur economic activity.
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Sixth, “money matters”: the Fed should pay attention to money created by the central bank and money that comes from the banking and financial systems
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Finally, the Fed will be in a better position to meet its objectives if it is “quieter”
Warsh: there are either reasons or results
Kevin Warsh puts his finger on an important point – if the Fed, or the financial markets, mess up, the most serious harm is likely to befall those without financial assets.
As he puts it:
If the Fed gets inflation wrong and judges the economy wrong, who gets the worst of it? Not the financial high-fliers. Hard-working Americans are the ones left to deal with inflation that is too high or jobs that suddenly appear less secure.
He pledges that the Fed will “endeavor” to construct more reliable models and more robust rules to guide policy decisions, adding:
We’ll do this knowing that accuracy in economic forecasting is still just an aspiration
A “quieter Fed” will be better able to meet its objectives, he insists- pledging to be judged on its results (its mandate is to control inflation and deliver full employment)
And we can be held accountable for delivering on our remit—the only true test of our credibility. To borrow a line from General Chuck Yeager, “At the moment of truth, there are either reasons or results.
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Watch Kevin Warsh's speech here
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Warsh: Forward guidance has overstayed its welcome
Kevin Warsh moves on to criticising the practice of ‘forward guidance’ – something he’s really not a fan of.
Forward guidance is the practice where central bankers signal future monetary policy intentions, such as the likely, or expected, path of interest rate.
Warsh argues that “the practice has overstayed its welcome”, claiming it “risks creating ambiguity in the name of clarity”.
He also hints that investors shouldn’t expect the Fed to hold their hands, saying:
Market participants themselves should be tracking real information across the economy. They should draw their own conclusions; form their own expectations of output, employment, and inflation; and stay sharply attuned to risks.
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Warsh: AI can deliver growth, but who makes the money?
Artificial intelligence is providing the potential for “substantially higher growth” in future, Federal Reserve chair Kevin Warsh declares.
Warsh explains that the Fed is watching AI closely, telling the Jackson Hole symposium:
Ever-expanding pools of capital are pouring into AI-related infrastructure of all sorts. A kind of hyper–Moore’s law seems to be playing out. Scaling laws, too, are changing both the method and speed of innovation.
Capital and labor have combined to create the large language models at the heart of AI. Users buy tokens to gain access to the models. Reports put annualized token sales for the two leading labs alone at more than $100 billion—an increase of 500-plus percent from a year ago.
The Fed watches all of this attentively. We recognize that AI is a new variable—potentially a new factor of production—that will have consequences for both the economy and the conduct of monetary policy.
AI also opens “some major lines of inquiry”, he explains:
Will the application of AI cause a significant, sustained rise in productivity across the economy? And if so, when?
Will token usage be complementary or competitive to labor? Will the next generation of AI models demand even greater capital intensity, or will the models themselves help devise a capital-light solution?
Another AI unknown, Warsh adds, is the market structure that will result – “who gets to make the money”?
The Fed chair says:
It’s not obvious where the returns on capital will land or on what timescale. Early on, how much of the surplus goes to owners of scarce assets—AI labs, chipmakers, energy producers, and cloud providers? Over time, how much of that value accrues to businesses and consumers? What are the broad implications for workers and for the employment side of the Fed’s mandate?
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Kevin Warsh then says that his remarks today will be an “outline” or a “trail map” of the economic situation, adding:
Just don’t call it forward guidance.
Warsh speech begins
Over at Jackson Hole, Wyoming, the world’s most powerful banker is beginning to give a closely watched speech.
Kevin Warsh, chair of the Federal Reserve, begins his address to top central bankers and policymakers with a joke about hiking in the great outdoors.
Warsh says:
As I learned years ago, you can take two different kinds of hikes on the trails around Jackson Hole. I can sum up my hikes with former Vice Chairman Don Kohn in two words: I survived. These steely marathon death marches revealed a side of Don I wasn’t ready for.
There’s another kind of hike—one I associate with Chairman Ben Bernanke, my old colleague. With Ben, it’s a much more leisurely pace, an easy stroll along the wandering trails at the Rockefeller Preserve.
So before setting out, do a wellness check and ask yourself: “Is this a Kohn day or a Bernanke day?”
BoE's Mann: Need to watch for spillovers from US
Ahead of Warsh’s speech, Prof Catherine Mann, a member of the Bank of England monetary policy committee (MPC) was interviewed by Bloomberg TV in a drizzly Jackson Hole.
Mann, who voted for an interest rate rise at the MPC’s last meeting in July, told them she would be watching US developments closely.
“It’s been very important, the spillovers from the policy in the United States, as well as the macroeconomic conditions,” she said, describing them as, “very important ingredients”.
“There’s a lot of crossover. There’s a lot of spillover,” she added. Asked about the risks of higher rates choking off economic growth, she said the MPC could have an impact rapidly, via inflation expectations.
There’s an increasing amount of research, in particular at the UK and Bank of England, that my decisions can have an immediate effect on expectations of firms and households about what they think inflation is going to be. So I don’t have to wait for a demand effect to see implications for my decisions on the CPI [inflation] and especially on CPI expectations, and that, of course, is a key ingredient to the choices that firms’ pricing strategies and what workers demand for in terms of wages.
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If you’re counting down until Kevin Warsh’s speech begins at about 3pm UK time (aren’t we all!) we have an interactive timeline on how the Iran war has unfolded so far.
From the first US and Israeli strikes six months ago to the battle for Hormuz, it tracks how Donald Trump’s war on Iran quickly became a regional conflict with global economic consequences.
It also plots every major oil price change in that period – so it bears some significance to what Warsh could be discussing this afternoon…
There’s a mixed start to trading on Wall Street, as traders await Kevin Warsh’s speech in about 30 minutes time.
The Dow Jones industrial average has made a positive move – up 153 points, or 0.3%, to 53,722 points.
The broader S&P 500 index is flat, though, while the tech-focused Nasdaq has lost 0.1%.
Paypal is leading the fallers, down 13%, after Bloomberg reported that payments firm Stripe and private equity firm Advent International had dropped their plans for a takeover bid.
UK petrol prices hit highest level in almost four years
UK petrol prices have hit their highest level since 2022, piling more financial pressure on motorists before the bank holiday weekend.
The average cost of petrol has reached 161.6p a litre, while diesel costs an average of 183.4p a litre, according to the AA breakdown company.
The last time the petrol price was so high was in November 2022, when it soared in the aftermath of Russia’s invasion of Ukraine.
It comes as millions of people prepare to make car journeys over the bank holiday weekend, which will be marked in England, Wales and Northern Ireland.
The RAC estimates that the UK’s motorways and major roads could have the most traffic since its records began in 2015.
Luke Bosdet of the AA said the rise in petrol prices showed that UK pump pricing is “back to its worst”.
It is “too often overpriced and uncompetitive, with too many communities denied road fuel at a reasonable price”, he added.
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The latest economic news from Canada should comfort Mark Carney, as the PM faces a trade war with Donald Trump.
Canadian GDP expanded at an annual pace of 3.3% in the second quarter of this year, the country’s statistics body reported, up from annualised growth of just 0.3% in Q1.
The expansion was driven by higher exports, household spending and business capital investment, Statistics Canada reported.
Asda returns to growth after more than two years
Asda has claimed a return to growth after more than two years as the supermarket attracts more shoppers with lower prices.
Chairman Allan Leighton said a 0.2% rise in sales at established stores over the seven weeks to 18 August was “a huge milestone” which was “psychologically important for the business”. In the second quarter sales fell 2.3%.
“Our price position is strong, we are now getting more customers in the business and we have got some momentum online and that’s been the biggest drag,” Leighton said. The last time Asda’s sales rose was in the first three months of 2024.
Asda had been struggling with falling sales and profits since it was bought by private equity firm TDR Capital and the Issa brothers. TDR now controls the business.
It has also been batting a huge debt pile, while paying out close to £1bn to revamp its IT systems.
Leighton returned to help turn around the business for the second time in his career in November 2024 after a 20-year absence.
Speaking to the Guardian, he said:
There is some momentum in the business and it is upwards and that is important.
He had “never felt not confident”, and Asda could be revamped as “the business is too good not to be turned around”.
Leighton added it was not clear if shoppers’ sentiment had improved since Andy Burnham became prime minister, but said:
People are waiting to see… I think John Healey is a good choice as chancellor he is very sensible and objective.
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China’s BYD has seen its first quarterly rise in profit for more than a year, helped by a boom in sales abroad.
The world’s biggest electric car maker has seen a sharp downturn in demand in its home market, but has made up for that with an aggressive push into Europe and elsewhere.
Net profit rose 29.8% compared with last year to 8.2bn yuan (£899m) in the second quarter, even as revenue fell by about 3% to 194.6bn yuan.
The company, based in southern China, overtook Tesla last year as the world’s biggest EV maker by sales.
Earlier this summer, BYD’s founder and chair, Wang Chuanfu, said he wanted it to be the world’s biggest car maker within five years.
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British shoppers are munching more beans, lentils, tofu and tempeh – while cutting back on real and fake meat – to save money and improve their diet, analysis shows.
The amount of beans, pulses and soya bean derivatives sold in the UK increased by 7.3% in the first half of 2026 compared with the same period last year, led by a rise in cheap dried lentils, according to the data from NielsenIQ which was evaluated by the climate advocacy group Madre Brava.
That was led by a 23% surge for cheap dried lentils, while shoppers also turned to more upmarket legumes – including organic and jarred varieties – pushing sales of canned and jarred butter beans up by 30.3%.
That growth was partly driven by new products and brands – such as the Bold Bean Co, Navarrico and Marks & Spencer’s own-label – as well as recipes going viral on social media.
Fake meats, once seen as the future of vegetarian and vegan diets, also continue to fall out of favour, with 4.3% fewer packages sold.
The Madre Brava report said:
Shoppers are not abandoning plant proteins – they’re shifting toward simpler, higher-fibre foods, whose prices are rising more slowly than food inflation, widening the price gap with meat.
This indicates that, while food inflation and affordability remain key factors, nutrition and health benefits are also driving purchasing decisions.
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There are some jitters in the European bond markets, as traders await Kevin Warsh’s speech at Jackson Hole in two hours.
Reuters has spotted that the yield, or interest rate, on Germany’s 10-year bonds has hit a 15-year high today, at 3.2847%.
The 30-year bund yield is also a 15-year high, rising to 3.7877%.
France’s 30-year debt costs have hit an 18-year high, at a yield of 4.9266%.
US and UK borrowing costs are also higher today – so, not the best backdrop for the US Federal Reserve to be speaking….
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John Healey to duck setting a date for defence spending target
The chancellor, John Healey, will delay setting out when the UK will meet the target of spending 3% of GDP on defence until next year’s spending review, the Treasury has confirmed.
Healey resigned as the defence secretary in June under Keir Starmer’s leadership, accusing the then prime minister of being “unable” and the Treasury “unwilling” to “commit the resources that the nation needs to defend the country”.
However, since succeeding Rachel Reeves when Andy Burnham arrived at No 10, Healey has declined to set a date for meeting the 3% target, which he had previously insisted should be hit by 2030.
Treasury sources confirmed that instead, the focus in Healey’s first budget on 28 October would be fully funding the defence investment plan.
Defence spending is poised to reach 2.7% of GDP by 2030, funded partly by Starmer’s decision to slash how much the UK spends on foreign aid.
Healey had previously said that this should rise to 3% urgently, given rising global conflicts and security risks. But Burnham has so far refused to commit to the 3% target.
In an interview with Sky News on Friday, Healey said fiscal discipline was the “first priority” for any chancellor.
He said:
It’s the bedrock for economic stability… We simply can’t deal with the problems we face as a country by maxing out the country’s credit card.
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In the metals market, supply fears have pushed the zinc price up to a four-year high.
Zinc, which is used to galvanise steel, hit $3,955 a metric tonne this morning, its highest since May 2022.
Traders have been watching signs of supply tightness on the London Metal Exchange, as warehouse stockpiles have dropped following mine supply cuts.
Neil Welsh, head of metals at multi-asset brokerage Britannia Global Markets, explains:
LME [zinc] inventories have been drawn sharply lower, mine and smelter disruptions have restricted refined availability, and supply outside China has become notably tight.
With consumers facing a thinner pool of immediately available units, relatively modest buying has produced a larger price response than elsewhere in the complex. Copper remains supported by the same availability concerns.
More on household costs from the ONS…
The latest figures show transport contributed quite a bit more to household inflation in the year to June than it did in the year to March.
That will come as no surprise for motorists, after the Iran war pushed up the price of petrol through March, April and May.
Transport contributed 0.79 percentage points (out of the total 2.8% rise) in the year to June, compared with 0.58pp in the year to March, the ONS said.
This was because of higher contributions from fuels and lubricants, which increased from 0.14 to 0.56pp over the same period.
Economists have already warned that higher fuel costs could eventually force the Bank of England to raise interest rates.
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We have some more detail on where inflation is showing up in the economy this morning, with breakdowns on UK household costs from the Office for National Statistics (ONS).
The headline figure is that price rises slowed down between the first and second quarters of 2026.
Household costs rose by 2.8% in the year to June 2026, compared with 3.6% in the year to March, the ONS said.
Here’s what that looks like in the context of the last few years…
But there are some interesting breakdowns by household type in there.
For example: private renters had the highest rise in costs of 3.0% in the year to June 2026.
At the other end of the scale were outright owner-occupier households, who saw costs rise 2.6% over the same period.
Through another lens: retired households had just a 2.5% rise in annual costs compared with non-retirees, for whom it was 2.9%…
…that is a reverse of what was happening during the energy crisis of 2022, when retirees were feeling the pinch.
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The FTSE 100 is trading higher after yesterday’s disappointment, with mining stocks among the best performing.
London’s blue-chip index was 0.22% up at 10,815 points, making up some of its losses from yesterday when its relative lack of tech stocks meant it fell 0.8%, missing out on the party after Nvidia’s blockbuster quarterly results.
The chipmaker announced on Wednesday that its quarterly revenue had doubled in a year to nearly $100bn, prompting founder Jensen Huang to declare a “golden age” for the AI industry.
It prompted a rally across the Atlantic on Thursday, where the S&P 100 rose 0.97% and the tech-heavy Nasdaq soared 1.57%. That may now be helping the FTSE after the fact…
Dan Coatsworth, head of markets at AJ Bell, writes:
Strong numbers from Nvidia and other tech sector constituents like Crowdstrike and Salesforce have helped shore up market sentiment, supported by some hints at dampened tensions in the Middle East.
The next test of investors’ mettle will come later when Federal Reserve chair Kevin Warsh addresses the Jackson Hole Symposium of central bankers and politicians.
While immediate concerns about levels of government debt may have eased, with bond yields coming back down, the underlying issues haven’t gone away.”
Sentiment may also have been helped by a survey suggesting business confidence has reached its highest point since the start of the Iran war.
The Lloyds Business Barometer increased by four points to 53%, as stronger demand and greater optimism about the economy boosted companies.
Gold prices also hit their highest level in more than three months this week as continued conflict in the Middle East and ongoing political uncertainty fuelled a rally.
Endeavour Mining, Melrose Industries and Anlgo American, all miners, were among the top risers on the FTSE.
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Venezuela 'considers quitting OPEC' as US looks to seal oil access
Venezuela is reportedly mulling whether it should quit OPEC, potentially delivering a blow to the oil cartel.
US officials are thought to be in talks with the country’s leaders over taking a large stake in the country’s oil fields, following Donald Trump’s surprise raid in January when he captured former leader Nicolas Máduro.
One part of the discussions, reported Bloomberg, is whether Venezuela could leave OPEC, which also includes Saudi Arabia and Iran. No final decision has been made.
Trump has already claimed that the US controls Venezuela’s oil and has called it the 51st state.
OPEC, founded in 1960, is a group of major oil-producing countries that works as a cartel to control global oil supplies and prices. It stands for the Organization of the Petroleum Exporting Countries.
Venezuela’s oil-reated influence has waned since then. It pumped 1.16 million barrels a day in July, less than half that of 10 years ago.
But its exit would add to doubts over the cartel’s ability to hold a tight fist on global oil supply, as it has done for decades, after the United Arab Emirates also left the group earlier this year.
Here’s our report from when the UAE announced it back in April…
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Burnham announces crackdown on rogue bailiffs
Andy Burnham’s latest “everyday fix” to ease the cost of living will be to clamp down on rogue bailiffs, amid concerns that vulnerable people are being overcharged and face aggressive behaviour.
The prime minister said on Friday that he was strengthening the rules that apply to bailiffs in England and Wales to better protect people in debt.
It comes two months after the Guardian revealed that the government had been accused of dragging its feet on the issue.
The industry collects more than £1bn annually – but enforcement companies are not required to be authorised by the Enforcement Conduct Board (ECB) and some have refused to sign up.
The government said private bailiffs will need to be accredited by the ECB, or work for an enforcement company that is.
It added:
Private bailiffs will be held to consistent professional standards, and those facing enforcement action will have access to an independent complaints process – strengthening the rights of the most vulnerable.
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Back on this side of the pond, revised economic figures show that France only narrowly avoided a recession in the first half of the year.
Economic output shrank 0.2% in the first quarter and flatlined in the second, according to the statistics agency Insee.
Note: It had previously estimated just a 0.1% decline in January to March, and 0.2% growth in April to June.
The French government has been vocal about its goal of reducing the budget deficit – which is when a government spends more money on public services, healthcare, and infrastructure than it collects in taxes and other income.
It has previously said it wants to bring the deficit to below 5% of GDP next year.
But it also has to balance that with pressure across Europe to spend more on defence, as well as AI spending. Lower GDP forecasts will only make that more difficult.
French minister for finance Roland Lescure said on Friday said the figures showed how this summer’s heatwave had hit the economy, calling it “the first impact from the horrible summer we have had”.
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Today is the second day of the Jackson Hole conference – here are the Fed chiefs arriving for dinner yesterday.
First, the man of the moment, Kevin Warsh.
And are a few more arrivals, including Fed governor Lisa Cook, who remains subject of Donald Trump’s plans to oust her over allegations of mortgage fraud – despite a US supreme court decision that said she should remain.
Cook received a letter from the White House earlier this month that accused her of falling “well short of the standard” required of a sitting Fed governor and requested written response to the same mortgage fraud allegations as before.
The supreme court in June ruled 5-4 that Cook was entitled to stay on as Fed governor while she fights the allegations, writing that Trump “failed to afford Cook the procedural protections to which she was entitled by statute”.
Cook’s lawyers called the allegations “as baseless now as they were a year ago”.
And here is the president of the Kansas City Fed, Jeffrey Schmid, enjoying the scenery.
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There is some speculation that Kevin Warsh won’t give much forward-looking policy indications at all…
That is because he’s previously said he doesn’t think forward signals like this are useful outside of economic crises.
So what will he say?
Kathleen Brooks, research director at the trading firm XTB, reckons:
This speech could focus on bigger issues, such as how he plans to run the world’s most important central bank, and also what changes he will make and when.
While not offering direct guidance on the future of interest rates, everything he says will be scrutinised by investors, and changes that he plans to make could still trigger market volatility.”
Warsh said in July that he still hadn’t decided “whether it’s going to be a big-picture speech” or something more traditional.
Reminder: Fed governors usually use Jackson Hole to signpost where monetary policy will go in the future, and that is a key indicator for financial markets.
Deutsche Bank wrote in a note to clients on Friday:
That leaves him a few options for today. According to our US economists, they think that a ‘big-picture’ speech could include a discussion of the Fed’s taskforces, or potentially on AI’s economic impact.
Alternatively, the ‘more traditional’ speech might see Warsh do a ‘cleanup’ of the July press conference, and he may wish to counter one market narrative that Fed policy actions could be delayed until the task forces have completed their work.”
Warsh was accused by investors of sending confusing signals in his first press conference as Fed chair in July, after he expressed his commitment to curbing inflation without giving details.
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Introduction: Fed's Kevin Warsh prepares for Jackson Hole speech with inflation top of the agenda
Good morning, and welcome to our rolling coverage of the global economy, the financial markets, business and the global economy.
All eyes are on a mountain valley in Wyoming today, as central bankers and economists gather close to Yellowstone national park for a top-level symposium.
Inflation, and the bond market, is top of the agenda at the annual Federal Reserve symposium at Jackson Hole this year, as the Iran war puts pressure on the global economy.
Jackson Hole has been dubbed the Davos for central bankers, and today the financial markets are bracing for a speech from the world’s most powerful central bank chief, Kevin Warsh, at 3pm UK time (10am Eastern).
Warsh is under pressure to provide clarity on how the Federal Reserve, which he leads, should deal with inflation if price pressures don’t abate. Last month he created uncertainty by suggesting that the markets, not the Fed, should take the lead on tightening financial conditions.
But investors also hope to hear Warsh’s view on the recent interference in the bond markets by Treasury secretary Scott Bessent, who has been trying to push down US long-term borrowing costs by buying long-dated bonds.
Besssent’s move appears to put the Treasury on a collision course with the Fed - lower borrowing costs will spice up the economy, undermining the battle against inflation.
Ipek Ozkardeskaya, senior analyst at Swissquote, says the stakes are high for Warsh’s speech, for three reasons:
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It will be Kevin Warsh’s first as Fed Chair, at a time when inflation remains stubbornly above target and long-term yields have been under pressure.
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Kevin Warsh is trying to change the way the Fed functions and communicates its policy to the market (or whether it communicates at all!).
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Investors are questioning, since Treasury announced last week that it would increase its longer-term bond buybacks to tame borrowing costs, how the Fed will respond to the Treasury’s intervention in the bond market, which – if successful – could interfere with the Fed’s policy path and the transmission of its policy to the economy.
Last month, Warsh said he wanted his speech to focus on important points such as AI and productivity, demographic changes, and the global economy’s response to shocks from the Iran war. So we shall see!
The agenda
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10am: Eurozone inflation report for August
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1.30pm: Canadian GDP for the second quarter
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3pm UK (10am EDT: Fed chairman Kevin Warsh delivers the keynote address at Jackson Hole Economic Policy Symposium in the US
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3pm: University of Michigan consumer sentiment index
