Economists betting on a rate hike after Fed chair speech 

In his first speech at the Federal Reserve's annual Jackson Hole Economic Symposium as chair, Kevin Warsh struck what economists agree was a hawkish tone, warning that inflation is the central bank's primary focus but refusing to commit to any specific action at the Fed's September meeting.

AI, economic resilience and 'more purposeful' communications

Warsh's Aug. 28 speech touched on artificial intelligence, current economic conditions and his approach to issuing forward guidance.

On AI: The Fed is "attentively" watching for AI's economic impacts. "We recognize that AI is a new variable — potentially a new factor of production — that will have consequences for both the economy and the conduct of monetary policy," Warsh said.

One of the task forces he announced earlier this summer is assessing those anticipated impacts, he added, but "their recommendations will come later and have no bearing on decisions we make in the current policy conjuncture."

On forward guidance and a 'quieter Fed': Early in his tenure as chair, Warsh suggested that previous Fed leaders shared too much forward guidance. The trend began during the Great Recession — a time of economic crisis when more transparency was necessary — but current circumstances no longer require the practice, he said.

"In normal times, the role of forward guidance should be limited and circumscribed. Otherwise it risks creating ambiguity in the name of clarity," Warsh said, adding later that a "quieter Fed, more purposeful in its communications, is better able to meet its objectives."

On the economy today: Warsh was bullish about the economy's performance amid recent shocks, likely a reference to the ongoing war in the Middle East that has driven up energy prices. Real consumer spending is "healthy despite the shocks" and the labor market is "quite stable," he said.

Warsh made only one reference to the housing market, acknowledging that "certain sectors — like housing and agriculture — are showing strains," but "on balance, I would be hard pressed to describe broad financial conditions as restrictive."

Inflation, however, is a different story. "On the price-stability side of our mandate, the numbers are more concerning," Warsh said. "Inflation is running above our 2% target. So the Fed's predominant focus right now should be on prices."

On what comes next: At the Federal Open Market Committee's (FOMC) July meeting, Warsh noted that the committee's voting members largely agreed that "inflation remained too high" but felt more data was needed before making changes to monetary policy.

Though the FOMC has held short-term interest rates steady all year, three voting members had wanted to raise rates last month.

For now, Warsh said he is "committed to a discipline, not to a decision."

A 'hawkish and clear' message

In the hours after Warsh's speech, many economists agreed that the chair's statements and reluctance to commit to a specific course of action were consistent with expectations.

"Warsh's message was hawkish and clear: the inflation fight isn't over, rates are likely headed higher, and the Fed will be less inclined to telegraph its next move," First American Chief Economist Mark Fleming said.

Realtor.com Senior Economist Jake Krimmel interpreted Warsh's speech as "a credible threat" for a future rate hike: "The question is not if the Fed hikes, but when."

Mortgage rates barely budge

Warsh's speech had little immediate impact on mortgage rates, according to Mortgage News Daily, which pegged the daily 30-year rate at 6.76% — just a smidge higher than one day earlier.

Since the Fed is widely expected to combat inflation by raising rates at its next meeting, "some of the future expected higher rates are already 'baked in' to mortgage rates," Fleming noted. Though 2026 began with rates trending down, they jumped back up around mid-6% after the war began and are hovering around the highest levels of the year.

While Krimmel said he "would not predict any real mortgage rate relief this fall," getting inflation under control could "put the housing market in a much better place — on mortgage rates and on purchasing power — in the next 6 to 12 months, and beyond."