Updated

Updated · Yahoo Finance · Sep 3

Krugman Calls Warsh's Jackson Hole Speech Conventional as 55% September Hike Odds Signal Continuity

Updated

Updated · Yahoo Finance · Sep 3

Krugman Calls Warsh's Jackson Hole Speech Conventional as 55% September Hike Odds Signal Continuity

1 articles · Updated · Yahoo Finance · Sep 3

Paul Krugman said Kevin Warsh's first Jackson Hole speech gave little sign Fed rate policy would materially change, despite months of promises to break with tradition.
Warsh kept the Fed's 2% inflation target and PCE gauge intact, called the target "firm" and "fixed," and said policymakers still need clear, fast progress on inflation before easing.
July PCE inflation at 3.7% and a labor market Warsh described as near full employment left little case for lower rates, reinforcing a hawkish reading of the speech.
September rate-hike odds rose to about 55% from roughly one-third a day earlier, suggesting investors heard a shift in Fed communication style more than a shift in policy.

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With Warsh ditching forward guidance, could hawkish signals trigger an unexpected September rate hike that catches markets completely off guard?

Will the Fed's rigid adherence to a two percent inflation target accidentally plunge the currently resilient labor market into a sudden recession?

How will Wall Street navigate the sudden silence of forward guidance now that the central bank relies entirely on unpredictable incoming data?

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