Fed Chair Warsh keeps September rate hike in play as inflation stays high

Federal Reserve Chair Kevin Warsh said Friday, August 28, 2026, that inflation remains too high and policymakers must be prepared to raise interest rates if price pressures do not retreat. His remarks kept a rate increase at the Fed’s September meeting under consideration, but he did not announce a decision.

Speaking in Jackson Hole, Wyoming, at the Federal Reserve Bank of Kansas City’s Economic Policy Symposium, Warsh reaffirmed that the Fed’s price-stability objective is a fixed 2% inflation rate measured by the personal consumption expenditures, or PCE, price index.

The inflation measures he cited remain well above that target. Warsh said 12-month PCE inflation stood at 3.7% and the six-month annualized rate was 4.1%. He also said 49% of 199 individual PCE components recorded six-month annualized price increases above 3%. Over 12 months, 54% of the components were above 3%.

What Warsh’s comments mean

Warsh said inflation has fallen substantially from its 2022 peak, but he described progress during the past two years as modest. He said recent summer PCE and consumer-price index readings, although better than expected, did not show meaningful improvement in underlying inflation.

The separate July PCE report from the Bureau of Economic Analysis showed the PCE price index rose 3.7% from a year earlier and that the index excluding food and energy rose 3.3%. The monthly PCE index increased 0.2% in July, as did the core measure. Those figures are different from the six-month annualized measure Warsh cited in his speech.

Warsh said short-term interest rates remain the Fed’s predominant policy tool and that policymakers must be ready to act as circumstances require. His assessment suggests that officials may judge current financial conditions insufficiently restrictive if inflation does not move toward the 2% target more convincingly.

He framed his position as a commitment to discipline rather than a final decision. In practical terms, another increase remains possible if the data warrant it, but the Federal Open Market Committee has not voted to raise rates.

Markets adjusted expectations

Associated Press reported that the yield on the two-year Treasury note rose from 4.22% to 4.30% after the speech, as investors increased the probability they assigned to a September rate hike. Those market expectations are not official Fed guidance and do not guarantee what policymakers will do.

Warsh also said the Fed should avoid overcommitting to future policy decisions. That leaves incoming inflation data, labor-market information and broader financial conditions central to the September debate.

What households could feel

If the Fed raises its policy rate, variable-rate borrowing could become more expensive. Credit-card interest rates and some adjustable-rate loans generally respond more quickly than other forms of consumer credit, although the timing and size of any change depend on the loan and lender.

New mortgages, auto loans and other financing could also become more costly if market rates rise. The effect would not necessarily be immediate or equal across all borrowers. Existing fixed-rate mortgages generally would not change solely because of a Fed rate move.

Savers could see higher yields on some deposit accounts and other interest-bearing products, but banks do not always pass policy changes through at the same speed or by the same amount.

Next date to watch

The next scheduled FOMC meeting is September 15-16, 2026. Until then, Warsh’s remarks leave the central question open: whether the inflation data and economic conditions will lead the committee to turn a warning about possible action into an actual rate decision.

Sources

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