US Federal Reserve chair Kevin Warsh gives clear signal of rate rise amid inflation threat in Jackson Hole speech

The US central bank "will have work to do" unless inflationary pressures recede, according to its Trump-appointed chair who was under pressure to signal if interest rates would rise in response.

Kevin Warsh said that it was the Federal Reserve's job to meet its mandates, in remarks that will be seen as the very forward guidance he had previously pledged not to give during his time at the helm of US monetary policy.

"Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient
speed. Otherwise, we have work to do. That's our job... our mandate... and our charge ​to keep", he said.

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He added that short-term ​interest rates were the "predominant tool" at the Fed's disposal, but stopped short of suggesting when the bank might act.

Mr Warsh had been under growing pressure ahead of his speech to give clear guidance on how the Fed plans to tackle the threat posed by rising inflation, much of it fuelled by Trump administration policies.

Donald Trump's war in Iran has been blamed for raising not only energy costs, but also prices more widely through so-called secondary effects that see rising costs passed on across goods and services.

The escalation of the US trade war with Canada threatens to exacerbate the situation in the months ahead as higher tariffs take hold on both sides of the border.

US inflation data has already pointed to an estimated 5% rise in the annual cost of cars - on top of a 3.5% leap in utility bills.

Its consumer price measure of inflation stands at 3.7% - almost double the Fed's 2% target.

The gathering of central bankers and economists at the Jackson Hole event - held annually in Wyoming - was the first for Mr Warsh as Fed chair.

He was nominated for the role by Mr Trump.

While Mr Warsh's background and record largely satisfied financial markets at the time of his appointment, the Fed's refusal to raise interest rates under his watch to tackle inflation has led some to question the independence of the central bank, at a time when investors are already rattled over the sustainability of US public debt.

There was speculation he might be reluctant to discuss possible rate hikes to avoid angering the president, who wants cuts to grow the economy, or upset efforts by the US Treasury to lower its borrowing costs - as seen through a bond buyback intervention earlier this month.

Mr Warsh held off making direct comments on that, as had been widely expected, but told his audience on the battle against inflation: "Progress over the past two years has been modest."

He added that recent data did not tell him "that underlying trends have meaningfully improved".

Mr Warsh had made it clear after his first Fed rate-setting meeting in June that he did not favour giving forward guidance, like his predecessor Jay Powell, due to the volatile nature of global events.

At the last meeting in July, three of the 12 members of the Federal Open Market Committee backed a rise in the bank's key policy rate to a new range of 3.75%-4%.

After Mr Warsh's remarks, US expectations of a rate rise for September were split almost 50-50 between a rise and a hold, according to London Stock Exchange Group data.

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The ratio had stood at 65% in favour of no change just ahead of the speech.

Bond market pricing showed yields - the effective interest rate demanded to hold US government debt - easing back slightly.

Long-term borrowing costs, which have been at multi-year highs across many other Western economies, including the UK, as a result of inflation concerns, also came down by around two basis points. The dollar also strengthened against both the pound and euro.

The Fed gets to see one more employment report, and August inflation data, before its next rate decision in mid-September.

While it has a dual mandate covering both the jobs market and inflation, any increase in the latter will ramp up pressure on Mr Warsh to support a rate hike.

It could become a big test of his credibility, for financial markets and economists alike, should expectations for a rate rise intensify in the coming fortnight.

(c) Sky News 2026: US Federal Reserve chair Kevin Warsh gives clear signal of rate rise amid inflation threat in Jackson Hole speech