Fed's Warsh under pressure to clarify message in highly anticipated Jackson Hole speech
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Federal Reserve chairman Kevin Warsh made clear four weeks ago that he wants to use his speech at the Kansas City Fed's annual symposium in Jackson Hole, Wyoming, to take on big, lofty ideas, as opposed to the tactical details of what the Fed may do in this year's three remaining policy meetings.
The big picture: Warsh is under intense pressure to give a clearer message Friday at 10am ET than he has so far on the current inflation landscape, the prospects for near-term interest rate increases and the relationship between the Fed and the Treasury.
Flashback: Traditionally, the Fed chair uses the Jackson Hole speech to deliver a particularly important and long-range message — a notion that Warsh has endorsed.
Reality check: It will be hard for him to stay so high-altitude in light of the extraordinary cross-pressures visible in markets since then.
What they're saying: "To regain market confidence we think Warsh will have to bluntly state that the FOMC will raise policy rates if inflation as measured by core PCE does not move steadily downwards," Steve Englander and John Davies at Standard Chartered Bank wrote in a note.
Between the lines: Warsh is determined not to offer "forward guidance" about future Fed moves, which is well and good, but economists and traders are thirsting for more concrete engagement with some of the essential debates of this moment.
Of note: Before becoming chairman, Warsh spoke of crafting a new Treasury-Fed accord, updating the 1951 agreement that clarified the lines of responsibility between the two institutions when it comes to U.S. bond issuance and interest rates.
The bottom line: With the world's bond markets wobbling, Warsh's credibility is on the line in an early test of his leadership.
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