Federal Reserve Chairman Kevin Warsh delivered a stark warning on Wednesday, declaring that prices across the economy remain "excessively high" and dismissing any notion that the central bank would be satisfied with inflation running above its 2% target.
Warsh’s comments, reported by MarketWatch and Naftemporiki, struck a hawkish chord with traders who had been hoping for a softer tone from the Fed’s leadership.
The chairman emphasized that if households, businesses, or other economic actors believed the Fed would tolerate higher inflation, they would be disappointed.
The chairman emphasized that if households, businesses, or other economic actors believed the Fed would tolerate higher inflation, they would be disappointed.
The remarks underscore the central bank’s commitment to bringing price pressures fully under control before considering any easing of monetary policy.
US Treasury yields climbed sharply in response to the comments, as investors rapidly adjusted their expectations for the federal funds rate.
The sell-off in bonds reflected a repricing of the probability of near-term rate cuts, with the market now pricing in a more prolonged period of restrictive policy.