Barclays Flips to Two More Fed Hikes After Warsh's Jackson Hole Speech — SkimNews
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- Barclays expects the Fed to raise rates by 25 basis points in September and December, reversing its prior call for rates to remain unchanged through year-end.
- Kevin Warsh told the Jackson Hole symposium that policymakers would "have work to do" if they lacked confidence inflation was returning to the 2% target, calling it his clearest signal yet that further hikes may be needed.
- Warsh said inflation remained too high, financial conditions were not restrictive, and the labour market was consistent with full employment—framing price stability as the Fed's priority.
- Barclays characterized the speech as "notably hawkish" and an implicit case for further tightening, while still expecting monthly inflation prints to come in "much softer" than the longer-horizon measures Warsh emphasized.
- Barclays warned that "unfavorable base effects" will work against progress on those longer-horizon inflation metrics through year-end.
- CME Group's FedWatch tool shows markets now pricing a 60.4% probability of a September rate hike, with the Fed's September 16 policy decision the next major catalyst.
- Wall Street ended lower after Warsh reaffirmed the inflation fight at Jackson Hole, per a related Reuters report.
Why it matters: Barclays' 180-degree shift—from expecting zero 2026 hikes to two—adds a major sell-side voice to the hawkish camp after Warsh's Jackson Hole remarks. Markets have already repriced to a 60.4% September hike probability, and rate-sensitive sectors such as mortgages, equities, and long-duration bonds now face a tightening path rather than the steady-for-longer stance previously priced in, with the September 16 Fed decision as the next decisive checkpoint.
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