Federal Reserve Chair Kevin Warsh delivered a hawkish message at Jackson Hole, warning that the Fed still has “work to do” if underlying inflation does not move toward its 2% target clearly and quickly. He also argued that current financial conditions may not be restrictive enough, keeping further rate increases on the table.
Markets reacted sharply. According to the latest CME FedWatch-linked pricing, the probability of a 25-basis-point rate hike at the September 16 FOMC meeting jumped to 55%, from 45% before Warsh’s speech.
The hawkish repricing is creating negative sentiment across risk assets. Higher rate expectations and Treasury yields can pressure Gold, stocks and cryptocurrencies such as Bitcoin, as investors reassess liquidity and the cost of capital.
September has now become a critical meeting for global markets.
