Warsh's First Jackson Hole, and a Committee That Cannot Agree
The Fed chair speaks in Wyoming on August 28 with September's decision near a coin flip, and he has already told reporters the speech is a blank sheet of paper.
The Kansas City Fed's annual symposium in Jackson Hole opens on August 27, and for the first time the chair delivering the marquee speech will be Kevin Warsh.
The theme this year is financial innovation and its implications for payments and policy — a subject that has become considerably less academic since Congress created a federal framework for payment stablecoins and the comptroller began chartering the institutions that issue them.
Why this speech is different
Jackson Hole has spent two decades as the venue where Fed chairs signal turns. Ben Bernanke used it to preview asset purchases. Jerome Powell used it in 2020 to introduce a new policy framework and in 2022 to deliver eight minutes of deliberate hawkishness that knocked 3% off the S&P 500.
Warsh has built his short tenure on the opposite instinct. He has narrowed forward guidance, argued that detailed promises constrain a committee that should stay free to change its mind, and said at his July press conference that the August speech was a blank sheet of paper — that he had not decided whether to make it broad or to use it to prepare the ground for autumn policy.
The backdrop he walks into
The July minutes, released this week, showed that many participants believed tightening would be necessary if inflation did not fall. Three regional presidents already voted for an increase. Long-term Treasury yields hit their highest levels since 2007 this week before the Treasury announced larger buybacks.
Meanwhile the labor market is not cooperating with the hawks: payrolls fell in July, hiring has stalled, and wage growth is the slowest in five years.
Nineteen days separate the symposium from the September 16 decision, and markets are pricing that meeting close to a coin flip.
What to listen for
Three things would move the odds. Any characterization of how much weight the committee places on the labor market relative to inflation. Any reference to the neutral rate, which is the language chairs use to justify holding versus moving. And any endorsement of the meeting-calendar change he floated in July, which would tell the market that this chair intends to reshape the institution rather than simply run it.
The likeliest outcome, on his record, is a speech that gives markets less than they want — which would itself be information.
