Federal Reserve Chairman Kevin Warsh delivered a more hawkish message at the Jackson Hole symposium on Friday, stressing that inflation remains too high and reinforcing expectations that the central bank could raise interest rates if price pressures fail to ease.

While Warsh stopped short of signalling what the Fed will do at its September meeting, his remarks marked a clearer stance on inflation following uncertainty surrounding his July press conference. He emphasised that restoring price stability remains a priority and said current financial conditions are not broadly restrictive.

The Fed remains committed to its long-term 2% inflation objective, Warsh said, describing the target as “firm” and “fixed.” His comments came after the latest personal consumption expenditures price index showed annual inflation at 3.7% in July, well above the central bank’s target.

Warsh also pointed to the breadth of inflationary pressure across the economy. He noted that 54% of PCE components recorded annualised inflation above 3% over the past 12 months, while 49% exceeded that level during the past six months.

Although those figures remain below the extremes seen during the pandemic-era inflation surge, Warsh said they are still elevated compared with longer-term trends.

Other measures are sending a similar message. The consumer price index is currently running at 3.4%, adding to evidence that inflation has remained persistent despite previous monetary tightening.

“None of these measures are perfect, but they all tell a similar story: Inflation is running above our 2 percent target,” Warsh said.

His comments strengthened the case for keeping monetary policy tight and potentially raising rates should incoming economic data show insufficient progress on inflation.

Warsh also clarified the Fed’s approach to monetary policy, describing short-term interest rates as its primary tool for achieving its employment and inflation objectives. The statement was particularly significant given previous questions over how aggressively he would use interest rates to contain price pressures.

The Fed chairman also addressed the potential economic impact of artificial intelligence. Although the central bank continues to study developments in AI, Warsh said the technology currently has no direct influence on near-term monetary policy decisions.

His position represents a shift from earlier arguments that productivity gains from AI could eventually create room for lower interest rates.

The more hawkish message also puts Warsh at odds with President Donald Trump, who has repeatedly called for lower borrowing costs. Warsh did not directly address the president during his Jackson Hole speech, instead focusing on inflation and the Fed’s responsibility to maintain price stability.

Markets will now turn their attention to incoming economic data ahead of the Fed’s mid-September policy meeting. With inflation remaining well above target, Warsh’s latest remarks have increased the possibility that policymakers could consider another rate increase if price pressures remain persistent.

The decision will ultimately depend on the data released in the coming weeks, but the message from Jackson Hole was clearer than in July: inflation remains the Fed’s central concern, and higher interest rates remain firmly on the table.

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