Warsh's Debut Jackson Hole Keynote Turns Hawkish: September Hike Odds Jump to 57%

Fed Chair Kevin Warsh delivered his first Jackson Hole keynote Friday (10:00am ET, marking his 100th day as Chairman), and struck a notably more hawkish tone than his prior public remarks. Warsh said inflation remains 'above our 2 percent target' — 12-month PCE at 3.7%, six-month at 4.1% — and that while summer readings improved, 'they do not tell me that underlying trends have meaningfully improved'; price stability, he said, must be the Fed's 'predominant focus,' and the central bank 'may have work to do' on rates. He also announced a step back from forward guidance, quipping 'you can call it an outline, you can call it a trail map, just don't call it forward guidance,' and said the Fed would form task forces to study AI's effects on productivity and labor markets. Markets read the speech as a clear hawkish signal: CME FedWatch odds of a September 15-16 rate hike jumped to roughly 57% (from about 35% before the speech), the 2-year Treasury yield rose to around 4.32% (its highest since July), and the dollar index gained about 0.5% to 99.65. Stocks slipped modestly on the news — the S&P 500 fell 0.25% to 7,711.76 and the Nasdaq lost 0.52% to 26,402.42, though the Dow was roughly flat (-0.02% to 53,559.99) — but all three major indexes still closed the week higher (S&P +0.5%, Nasdaq +0.9%, Dow +0.5%, its first winning week in three).