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0 Share Newsweek is a Trust Project member See more of our trusted coverage when you search. Prefer Newsweek on Google to see more of our trusted coverage when you search. Federal Reserve Chair Kevin Warsh will address the annual Jackson Hole Economic Policy Symposium this week, an opportunity for Donald Trump’s handpicked central bank chief to clarify his views on interest rates, inflation and the Fed’s future direction under its new leadership.
Warsh, who was sworn in as Jerome Powell ’s replacement in May, will be delivering his keynote remarks on Friday. The former Fed governor has been relatively reserved since taking the helm at the central bank—offering observers few real insights into his thoughts on rates and the Fed's dual mandate—but any shifts in tone could alter the narrative on these topics, and the speech is being viewed as a major test of his early chairmanship.
“Markets will be looking for greater clarity on both his assessment of inflation and the broader ‘regime change’ he has advocated at the Fed,” Daniela Hathorn, senior economist at Capital.com, said in a note shared on Monday. “He has been reluctant to provide conventional forward guidance, meaning the speech may focus more heavily on the Fed's reaction function and longer-term philosophy than explicitly signaling what policymakers will do in September.”
When approached by Newsweek , the Federal Reserve declined to comment on the upcoming speech.
The Jackson Hole Economic Policy Symposium is an annual conference hosted by the Federal Reserve Bank of Kansas City. The meeting brings together central bankers, finance ministers, academics, economists and market participants, with the theme of this year’s being “Financial Innovation: Implications for Payments and Policy.” Historically, Jackson Hole has been seen as an opportunity for Fed leadership to shape the narrative on interest rates, inflation and the job market, as well as to address questions regarding the central bank’s approach to these matters.
During a press conference last month, after the Fed elected to leave interest rates unchanged, Warsh said he viewed the Jackson Hole meeting as “a blank piece of paper,” and that he would like to use his speech to focus on the “big questions.”
“[I] haven’t made a decision whether it’s going to be a big-picture speech or whether it’s going to be a more traditional set up for all the action we’re going to have between September and December,” he added.
Warsh has made clear that he is in favor of a less talkative central bank, and views the Fed’s past reliance on “forward guidance” about interest rates as outdated and potentially risky when the economic outlook is uncertain. Critics, however, believe this approach leaves investors and other market participants to fill in the blanks.
“Remember forward guidance came about as a way of talking down long-term borrowing costs after the financial crisis,” ING economist James Smith wrote this week . “It hasn’t always worked out that way, to put it mildly. But by offering less commentary on where rates are headed, let alone less clarity on what the Fed is looking for in the economic data, it risks injecting yet more volatility into an already febrile bond market.”
Whether or not Warsh chooses to remain taciturn on rates is therefore seen as a key question hanging over Friday’s speech.
“He might even stick to the official subject of the symposium, ‘Financial Innovation: Implications for Payments and Policy’, in which case his speech could be something of a snoozefest,” said Stephen Brown, chief North America economist at the consulting firm Capital Economics, as quoted in The Guardian. “That said, even that approach would risk giving the impression that Warsh is not taking inflation risks seriously, so there could still be volatility in markets.”
Warsh’s speech comes days after the country’s national debt surpassed the $40 trillion milestone, and as a confluence of other economic signals sent panic through the Treasury market . The Treasury has tried to quell spiking bond yields with an increased buyback of government debt, but this has so far had “limited impact,” according to note from Oxford Economics.
With the central bank setting the federal funds rate—which underpins borrowing throughout the economy and influences Treasury yields—Warsh’s remarks will be closely parsed by traders.
Mark Zandi, chief economist at Moody’s Analytics, wrote on X that Warsh’s reluctance to provide forward guidance had created “uncertainty” among bond investors, alongside “increasingly massive budget deficits,” corporate debt and “heightened uncertainty over future inflation.”
Warsh’s speech comes as the U.S. battles with a renewed bout of inflation, with the energy crisis caused by the Iran war exacerbating longer-term, broad-based price increases.
The most recent report from the Department of Labor revealed that headline inflation slowed to 3.4 percent in July from 3.5 percent in June and a three-year high of 4.2 percent in May. Despite the climbdown, the annual rate remains well above the Fed’s long-term, two-percent target, placing additional pressure on the Fed as it faces a weaker labor market and complicating any hopes that Warsh can deliver on President Trump’s hoped-for rate cuts. The minutes from the Fed’s latest policy meeting revealed that “many participants" believed tighter monetary policy could be needed to pull inflation toward the Fed’s target rate.
Warsh’s July speech faced criticism for failing to provide a clear strategy for how the Fed would tackle resurgent inflation, and his speech on Friday has been viewed as a chance to do so.
“Investors want Warsh to calm their nerves by distancing himself from his previous remarks and issuing a categorical statement on his willingness to push down on inflation by raising interest rates,” Mehreen Khan, the Economics Editor at The Times , wrote last week. “If not, the summer of bond selling could escalate into crisis terri...
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