By Andrew Miller
During his 100th day as Fed Chairman, Kevin Warsh made yet another departure from his predecessors at Friday’s Jackson Hole.
The annual conference has traditionally been where the Fed hints at the direction of rates or new ways to approach monetary policy. For example, last year’s Chair Jerome Powell hinted at rate cuts ahead. In turn, this caused a significant stock market rally.
This time around, Chair Warsh gave no such hints to investors.
That’s exactly how he plans on running the Fed.
Since taking over in May, Warsh has made a habit of telling markets less, not more. He skipped forward guidance after the July meeting. On Friday, he skipped it again.
In fact, he joked “You can call it an outline. You can call it a trail map… just don’t call it forward guidance.”
Despite better than expected inflation readings this summer, Warsh isn’t convinced the trend has meaningfully improved. The Fed’s preferred inflation measure is up 3.7% over the year through July. The target is 2%.
His summary was blunt. If the Fed is not confident inflation is heading down “clearly and at sufficient speed,” then “we have work to do.”
Warsh also acknowledged “the responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank.”
Traders read his tone as hawkish. They repriced the odds of a rate hike at the next FOMC meeting in September from about 35% before the speech to roughly 56%.
A month ago, rates holding steady in September looked like a safe bet.
Now it’s closer to a coin flip.
Some economists think an actual hike is more likely in October or December, with September serving as the warning shot.
For a small business owner, none of this is a decision yet. It’s a direction. And the direction has flipped.
For most of the year, the question was how soon rates would come down. Now it’s whether they’re about to go up.
P.S. Don’t wait for the Fed to tip its hand. Signet can get your business funded in as little as 24 hours. Let’s talk about your options.