Washington — At the annual Jackson Hole economic conference, Federal Reserve Chair Kevin Warsh used his remarks to reaffirm the Fed’s commitment to fighting inflation and to suggest that a rate increase in September is a real possibility. Warsh said the central bank will wait for clearer evidence of price‑level cooling before deciding, but noted that such evidence has not yet emerged despite modest declines in gas prices.
Potential September hike
Warsh told attendees that the Fed’s July meeting left rates unchanged while officials “await new information in the intermeeting period.” Analysts interpreted his comments as a signal that the Fed could raise its benchmark rate at the mid‑September meeting if inflation remains elevated.
Political backdrop
The prospect of a hike comes as the Fed prepares for two meetings before the upcoming midterm elections. President Donald Trump has repeatedly accused the central bank of political bias, claiming a 2024 rate cut was intended to aid Democratic candidates. Economist Adam Posen warned that skipping a September hike could raise questions about the Fed bowing to presidential pressure, while Chicago Fed President Austan Goolsbee emphasized that the bank’s decisions are driven by the state of the economy, not election cycles.
Impact on borrowers
Although a rate increase would raise the Fed’s policy rate, longer‑term Treasury yields – which heavily influence mortgage rates – barely moved after Warsh’s speech, suggesting markets remain confident the Fed will eventually tame inflation. The average 30‑year fixed mortgage rate sits at about 6.66%, only slightly higher than a year ago.
AI and growth outlook
Warsh also highlighted artificial intelligence as a potential engine for higher economic growth without stoking inflation, calling the moment a “hinge point in history.” Harvard economist Kenneth Rogoff offered a more cautious view, warning that rapid AI‑driven growth could eventually push rates higher.
Fed independence
Warsh’s comments underscore the ongoing tension between the Fed’s statutory independence and political criticism. While the administration has no legal authority to direct monetary policy, the President’s vocal opposition could shape public perception of the central bank’s actions.
Original reporting: Alexandria, VA News – WTOP News — read the source article.
