Warsh says the Fed's focus is prices and drops rate-path guidance

Fed Chair Kevin Warsh used his first Jackson Hole speech on Aug. 28 to say the central bank’s “predominant focus right now should be on prices,” while refusing to tell markets what the Fed will do at its Sept. 15-16 meeting ^{[1, 3]}. Traders raised their bets on a rate increase, and short-term Treasury yields rose ^{[6, 8]}.

Why it matters: Warsh also said he wants to scale back forward guidance, the Fed’s habit of signaling future rate moves in advance ^[1]. For buyers and lenders, that means fewer hints from the chair about short-term rates, and more weight on each inflation report. The Fed held its target range at 3.50% to 3.75% in July, with three officials voting for a quarter-point increase ^[2].

By the numbers

• 3.7%: The rise in the PCE price index from July 2025 to July 2026, the Fed’s preferred inflation gauge. It rose 0.2% in July alone ^{[1, 4]}.
• 3.3%: Core PCE inflation over the same 12 months, excluding food and energy ^[4].
• 4.1%: The six-month change in the PCE price index that Warsh cited, compared with a 2% target he called “a firm, fixed target” ^[1].
• 54%: The share of the 199 PCE components with price increases above 3% over the past year, by Warsh’s count, against 32% in the two decades before the pandemic ^[1].
• 55.7%: The market-implied odds of a September hike after the speech, about 20 points higher than the day before, according to CME FedWatch data cited by Mortgage Professional ^[6].

What Warsh said: He described forward guidance as a crisis-era tool that “has overstayed its welcome” and said that in normal times “Oversharing policy deliberations and overcommitting to future decisions can lead markets, businesses, and households astray” ^[1]. He also rejected committing to an explicit reaction function, arguing that no simple formula like a Taylor rule “could be rigorously relied upon” ^[1].

On the economy, Warsh said the labor market is “consistent with full employment,” with unemployment at 4.1%, and that credit markets show “few signs of policy restraint” ^[1]. He said this summer’s softer PCE and CPI readings “do not tell me that underlying trends have meaningfully improved,” and he put the blame for “65 months of sustained, elevated inflation” on the central bank ^[1].

His standard for the months ahead: “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do” ^[1].

Where housing fits: Warsh named housing, along with agriculture, as a sector “showing strains,” but said he would be hard pressed to call broad financial conditions restrictive ^[1]. Fed staff told policymakers in July that home-purchase mortgage activity “remained depressed,” as we reported in our story on the July minutes ^[3].

What it means for buyers and owners

• This week’s average predates the speech. Freddie Mac’s 30-year fixed average was 6.66% on Aug. 27, up from 6.65% a week earlier and 6.56% a year ago; the 15-year was 5.98% ^[5].
• The daily read barely moved. Mortgage News Daily put the 30-year at 6.76% on Friday, “just a smidge higher” than the day before, Real Estate News reported ^[7].
• Some of the hike may already be priced in. First American chief economist Mark Fleming said “some of that rate pressure is already baked into today’s mortgage rates,” and that “rates are likely headed higher” ^{[6, 7]}. Realtor.com’s Jake Krimmel said he “would not predict any real mortgage rate relief this fall” ^[7].
• Short-term yields moved most. The 2-year Treasury yield rose nearly 8 basis points to 4.31%, its highest since late July, Mortgage Professional reported ^[6].

What’s next: The FOMC meets Sept. 15-16 ^[3]. BEA’s August income and spending report, with the next PCE reading, is due Sept. 30 ^[4].

The other side: Some economists questioned whether less guidance means less accountability. Adam Posen, president of the Peterson Institute for International Economics, told Semafor that “three key words” were missing from the speech: “accountability, credibility, and responsibility.” He argued that deciding “at the last minute in a non-transparent way” lets a central bank avoid accountability for past mistakes ^[8]. The American Enterprise Institute’s Michael Strain said the speech “raises the stakes” for September and could bring either “additional clarity or additional confusion” ^[8]. Warsh’s own case is that markets leaning on Fed signals create “a hall-of-mirrors problem” whose costs fall hardest on “those without financial assets” ^[1].