Warsh Faces Rate Hike Test After Hot August CPI — SkimNews
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- August CPI data showed core prices up 0.3% and headline up 0.4% (3.4% year-over-year), turning the Sept. 15-16 Fed meeting into a defining credibility test for Chairman Kevin Warsh
- Warsh told Jackson Hole that "inflation is running above our 2 percent target" and that the Fed's "predominant focus right now should be on prices," explicitly downplaying better-than-expected summer CPI and PCE readings
- Governor Christopher Waller and New York Fed President John Williams were more inclined to wait for remaining data, with Waller saying Sept. 3 he'd support holding rates if disinflation signs continued — putting them at odds with Warsh's approach
- Waller has personally criticized Warsh, calling his advice "weird," reflecting friction rooted in Warsh's longstanding argument that the pre-Warsh Fed had lost its way
- The 10-year Treasury yield has climbed to 4.95% since Warsh became chair, with Warsh himself noting in July that "the markets have done quite a bit" since he took over
- President Donald Trump has pushed Warsh to cut rates while publicly saying he trusts his conscience, fueling analyst speculation of a tacit pre-midterm arrangement ahead of the Nov. 3 election
- If Warsh doesn't act on his warnings, investors may treat him as a shadow-chair figure himself, with Trump, Treasury Secretary Scott Bessent, or Waller emerging as alternative voices — likely pushing long-term yields higher
Why it matters: Warsh's credibility is on the line at the Sept. 15-16 meeting: he either backs his Jackson Hole inflation warnings with a rate hike or cedes authority to Waller — who's already called his advice "weird" — leaving Trump or Bessent as the real shadow chair. The 10-year yield at 4.95% shows markets are already tightening; a Warsh misstep could push it higher.
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