Warsh's first Jackson Hole speech (August 28, 2026) — September hike odds jump to 56 percent in a day
Federal Reserve chair Kevin Warsh delivered his first Jackson Hole keynote as chair on August 28, 2026. He called the overall strength of the economy impressive but said the underlying trends in inflation had not meaningfully improved and that the central bank has more work to do. He did not say the Fed would raise rates at its next meeting, and he maintained his refusal to give forward guidance. Markets repriced anyway: the probability of a quarter-point hike in September implied by fed funds futures rose to about 56 percent, having been a near-70 percent chance of a hold the day before, and the two-year Treasury yield rose nearly 8 basis points to 4.31 percent
The three lines
- Message — The economy is strong, but underlying inflation has not improved. More work to do
- Method — No forward guidance, no reaction function. No explicit September signal
- Reaction — September hike odds about 56 percent. Two-year yield 4.31 percent, highest since late July
Key questions
- What did Warsh say at Jackson Hole?
- **That inflation is still too high and the Fed's work is not finished.** Speaking on August 28, 2026 at the Fed's annual symposium in Jackson Hole, Wyoming — his **first keynote as chair** — Warsh described the economy's overall strength as **"impressed"**-worthy while saying he does not believe the **underlying trends** in inflation have meaningfully improved. The Washington Post reported him saying the central bank **"has more work to do."** On the summer's data he was explicit that better-than-expected PCE and CPI readings did not, in his reading, indicate improvement in the underlying trend. He **did not commit to a rate increase at the next meeting.** The address was structured as a broad statement of how he approaches monetary policy rather than a signal about a specific decision.
- What does refusing forward guidance mean?
- **That the Fed will not tell markets in advance what it plans to do.** Forward guidance — signaling the likely path of rates ahead of time to reduce market shock — became standard practice over the past decade and a half. Warsh has declined to use it since taking office and did not change course here. His stated reason is that it makes markets dependent on the central bank; he argued that **"we should not indulge a regime in which market participants are looking primarily to the Fed for their next trade."** He also declined to offer a **reaction function** — a rule describing how the Fed would respond to given data outcomes. **The cost of that stance is predictability.** With nothing pre-announced, markets have to infer direction from tone, which is why probabilities can move as far as they did in a single day.
- So is the Fed hiking in September?
- **He did not say, and markets now put it slightly above a coin flip.** Before the speech, CME FedWatch showed odds of a **hold** in September at **close to 70 percent**. Afterward, the probability of a **quarter-point hike** stood at **roughly 56 percent** — a shift of about 20 percentage points in a day. Bonds agreed: the policy-sensitive **two-year Treasury yield rose nearly 8 basis points to 4.31 percent**, its **highest since late July**. Equities slipped. The **S&P 500 closed down 0.25 percent at 7,711.76** and the Nasdaq fell 0.52 percent to 26,402.42. But **56 percent is a price, not a decision.** Employment and inflation releases between now and the September meeting can move it back.
Kevin Warsh delivered his first Jackson Hole keynote as Federal Reserve chair on August 28.
He did not say the Fed would raise rates at its next meeting. September hike odds flipped anyway.
1. What he said
| Topic | Position |
|---|---|
| Economy | Overall strength is "impressive" |
| Inflation | Underlying trends have not meaningfully improved |
| Policy | The central bank "has more work to do" |
| Method | Still no forward guidance |
| September | No explicit signal |
Warsh acknowledged that the summer's PCE and CPI readings came in better than expected, while saying they do not tell him the underlying trend has improved.
The address read as a statement of approach rather than a signal about a decision.
2. The choice not to pre-announce
Warsh has declined to use forward guidance since taking office, and did not change that here.
| Tool | What it does |
|---|---|
| Forward guidance | Signals the likely path of rates in advance |
| Reaction function | States how the Fed will respond to given data |
| Warsh's choice | Neither |
His reason is dependency. He argued that "we should not indulge a regime in which market participants are looking primarily to the Fed for their next trade."
The cost is predictability. With nothing pre-announced, markets infer direction from tone — which is why the numbers moved as far as they did.
3. What markets inferred
| Measure | Before | After |
|---|---|---|
| September hold probability | near 70% | — |
| September quarter-point hike | 30s | about 56% |
| Two-year Treasury yield | — | 4.31% (+nearly 8bp) |
The two-year is the maturity most directly tied to the expected policy path over the next two years. At 4.31 percent it is at its highest since late July.
Equities slipped.
| Index | August 28 close | Change |
|---|---|---|
| S&P 500 | 7,711.76 | −0.25% |
| Nasdaq Composite | 26,402.42 | −0.52% |
| Dow Jones Industrial Average | 53,559.99 | −0.02% |
The full session is covered in "S&P 500 closes at 7,711.76 on August 28, 2026."
4. The direction reversed in three weeks
This publication covered the collapse in September hike odds after the July employment report missed badly in early August. Three weeks later the probability has crossed to the other side.
| Point in time | Market's September view |
|---|---|
| Early August (weak jobs) | Hike odds collapsed |
| August 27 (day before speech) | Hold near 70% |
| August 28 (after speech) | Hike about 56% |
Fifty-six percent is a price, not a decision. One data release can move it back.
5. Why this matters outside the United States
The Bank of Korea raised its own policy rate to 3.00 percent the day before, on August 27, narrowing the gap with the US benchmark from 1.00 to 0.75 percentage points.
A September hike in Washington widens it again. How that gap reaches exchange rates is covered in "What the Korea-US rate gap is."
6. Related coverage
- "What the Jackson Hole meeting is" — the character of this symposium
- "Jackson Hole 2026 (August 27-29)" — the preview
- "What the Korea-US rate gap is" — the transmission to currencies
- "What the US CPI is" — the inflation gauge Warsh referenced
7. What was not confirmed
- Full text — not reviewed; quotations come from reporting.
- Probabilities — the 56 percent figure varies with measurement time, and the pre-speech figure differs across sources.
- Yield basis — whether 4.31 percent is intraday or closing was not confirmed.
- Other assets — 10-year yield and dollar index moves were not confirmed.
- Calendar — the September FOMC date and intervening data releases were not reviewed.
Sources
- The Washington Post — Fed chair Warsh, concerned about inflation, says bank 'has more work to do'
- CNBC — Fed Chairman Warsh warns on inflation at Jackson Hole
- CNBC — September Fed decision is now a coin flip as rate hike odds increase
- Forbes — Fed Chair Kevin Warsh says inflation still too high in first Jackson Hole speech
- PBS News — Fed Chair Warsh signals stubborn inflation may require rate hikes in Jackson Hole speech
- CNBC — S&P 500 falls Friday after Fed's Warsh highlights inflation worries, but index posts positive week