Fed Chair Warsh’s Jackson Hole Debut: What He Said, and Didn’t Say, About Rate Hikes

New Federal Reserve Chair Kevin Warsh gave the first Jackson Hole Economic Policy Symposium speech of his tenure. While he certainly said a lot, the most important thing is what he didn’t say. He provided no forward guidance and no real hint at whether the Fed could hike rates in September.

Inflation is still running significantly hotter than the Fed’s 2% target, and many of the voting members of the policy-making Federal Open Markets Committee (FOMC) are leaning toward a rate hike before the end of 2026. With that in mind, here’s what Warsh said, what he didn’t say, and how it could affect investors.

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What Warsh left out

Warsh gave his speech on the morning of Friday, Aug. 28, and he didn’t offer clear forward guidance on the future direction of interest rates. The Fed has held its benchmark federal funds rate at 3.50%-3.75% since last December, declining to make any changes for five consecutive meetings. Meanwhile, inflation has continued to run hot, thanks to higher energy prices and other factors.

At the most recent meeting in late July, the Fed decided to hold rates steady, but with a 9-3 vote in favor, a few dissenters favored a 25-basis-point rate hike. Several credible reports indicate that even more voting members have moved toward rate hikes, so the market was watching for any signals from Warsh. They didn’t get any.

Warsh’s silence is a big pivot

Warsh has long been critical of the Fed’s reliance on guidance. For example, the FOMC issues its forward outlooks on interest rates, economic data, and more four times a year. Warsh argues that forward-looking measures like this have the side effect of locking the committee into certain positions and encouraging markets to price in future actions that may or may not occur. So, Warsh’s silence was very deliberate.

Because of Warsh’s silence on rate hikes, September’s meeting outcome is a true mystery at this point. According to the CME FedWatch tool, which measures the probability of Federal Reserve rate moves priced into the markets, Investors are pricing in a 43% chance that the Fed holds rates unchanged and a 57% chance that we’ll get a quarter-point rate hike. With just over two weeks to go until the meeting, that’s about as divided as we’ve seen in a long time.

The bottom line is that the FOMC decision, which is expected on Sept. 16, has the potential to move the stock market significantly in one direction or the other. While Warsh refused to signal a rate hike, he also didn’t do anything to signal that there wouldn’t be one. The August CPI inflation data, which will be released prior to the meeting, could move expectations, so that will be worth watching. But Warsh reassured nobody, and that’s exactly what he wanted to do.