PRIMER - Fed Chair Warsh to deliver remarks at Jackson Hole at 15:00BST/10:00EDT
- This year’s economic symposium at Jackson Hole has the title “Financial Innovation: Implications for Payments and Policy.” Fed Chair Warsh is due to deliver remarks on 28th August at 10:00EDT/15:00BST, which traders will use to infer the path for near-term Fed policy ahead of the 16th September policy meeting.
- Previous Fed chairs have used the forum to signal upcoming policy actions. However, Warsh has begun his term with a bias against issuing any forward guidance, and has made the case that such guidance can shackle officials to their earlier forecasts, and his approach of little guidance will allow markets to interpret the data themselves.
- The approach has led to volatility; his lack of details at the July post-meeting presser unsettled bond markets, prompting a slide in longer-dated maturities. Since the July meeting, expectations of Fed rate hikes have eased following a run of downside data surprises, including a large miss in nonfarm payrolls, cooling inflation metrics, a GDP miss, and soft retail sales. Warsh is likely to reiterate the Fed’s commitment to bringing inflation back to target.
- Still, some analysts have suggested that the market could again be left disappointed; Saxo Bank’s analysts say the title of the forum suggests that Warsh will deliver thoughts on the potential use of stablecoins for financial system plumbing rather than the Fed’s thoughts on interest rates. Indeed, in July, Warsh told reporters that his remarks will aim to frame the ‘big picture questions’ rather than offer any clues about the near-term path, adding that his Fed is not constrained by market pricing.
- A recent Reuters poll showed most economists surveyed expect the Fed to keep rates unchanged in September, and through the end of the year; market pricing has moved dovishly after the soft run of data; at the time of writing, markets price around 64% probability of a hold in September vs around 50/50 just a few weeks ago.
- HSBC said “the debate clearly is about the possibility of rate hikes,” adding that “we’ve gone through the July inflation numbers, and they were basically neutral. On the activity side, the very latest data do show some softening. That could push more FOMC policymakers into the wait-and see camp rather than in the immediate rate hike camp.”
- You will be able to watch Warsh's comments live using this link via the Fed
The Jackson Hole address has a long history as the venue where Fed chairs lay out or foreshadow framework and policy shifts, which is why it draws outsized positioning even when no decision is attached. This instance carries an unusual tension: the symposium's stated theme is payments and financial innovation rather than the policy path, and the chair has publicly committed against forward guidance, framing remarks as big-picture rather than a signal for the coming meeting. Chairs who deliberately withhold guidance have historically shifted the burden of price discovery onto each data print, raising the sensitivity of the front end to payrolls, inflation and activity releases in the intervening weeks, and the soft run of data described here has already moved pricing in a dovish direction. The case split worth drawing is between a thematic speech, which leaves the repricing work to the data calendar, and any deviation toward the rate debate, which would re-price the September meeting directly given how finely balanced hold-versus-hike pricing has become. Prior form is that the absence of guidance has itself been a volatility event, with longer-dated maturities bearing the brunt. The follow-ons are the tone on inflation versus activity softening, any engagement with the hike debate, and how other officials frame the speech afterward.