Fed's September Hike Threshold Seen Lower After Warsh Speech

T. Rowe Price U.S. chief economist Blerina Uruci said the threshold for a September Fed rate hike has fallen materially after Kevin Warsh's Jackson Hole speech, according to ETNet. She said core inflation may need to slow more sharply, with monthly gains near 0.1%, for the Federal Open Market Committee to justify leaving rates unchanged. Warsh did not give explicit forward guidance, but his remarks clarified the Fed's policy reaction framework and made his stance appear more hawkish. Uruci said the market now sees about a 50% chance of a September hike. Over the next 12 months, she still expects inflation to ease gradually, leaving her medium-term rate view tilted dovish, but the near-term path will depend more on whether inflation improves quickly than on the cumulative trend over several months. She also said Warsh's comments reinforced the Fed's anti-inflation credibility, with the central bank still focused on its 2% PCE inflation target and not seeing a major risk to full employment. Uruci added that the U.S. economy remains supported by an AI-driven capital spending cycle, while the labor market is in a low-hiring, low-layoff balance and inflation is expected to cool further in the second half of the year.