Warsh likely to signal more rate hikes as inflation remains persistent

Federal Reserve Chair Kevin Warsh is likely to signal that recent economic data have done little to ease concerns over persistent inflation, reinforcing the case for further monetary tightening at his post-meeting press conference, Deutsche Bank said.

Warsh is expected to stress that the Fed remains committed to achieving price stability in a timely fashion and that tighter financial conditions would not substitute for further rate increases, analysts led by Matthew Luzzetti, Deutsche Bank’s chief U.S. economist, said in a research note.

Recent inflation readings are likely to weigh on Warsh’s assessment after a broad-based beat for CPI, with core personal consumption expenditures inflation expected to rise to 3.1%-3.2% year over year in September. Third-quarter gross domestic product data are also expected to show continued solid growth, while labor-market conditions remain stable, the analysts said.

Warsh is likely to acknowledge that financial conditions have tightened recently, while reiterating that the Fed monitors financial conditions, the analysts said. Whether he continues to characterize overall financial conditions as accommodative will be a key point to watch.

The analysts said Warsh would want to avoid language like that used at his July press conference, which led markets to question the Fed’s willingness to act.

The press conference might also address the economic implications of artificial intelligence. Warsh is likely to acknowledge that the technology could bring supply-side developments that help tame inflation over time, while noting that stronger demand linked to AI could add to price pressures in the near term, the analysts said.

He could also touch on the external task forces he initiated, including one on productivity and jobs, with a first field hearing planned in the Bay Area on Nov. 16.

September’s dot plot showed 16 of 18 officials expecting at least one more hike this year, while only four anticipated another 50 basis points of increases in 2026, the analysts said. They forecast a total of 50 basis points in additional tightening, with 25 basis points each in December and March.

The Fed is expected to hold rates steady at its October meeting.