09.08.2026 - Tough talk on inflation, awkward timing for hikes

In his Jackson Hole speech, regarding the Fed mandate to ensure stable prices, Chair Warsh stated that our “imperfect” measures of inflation, a.k.a. CPI and PCE, have “fallen significantly from their 2022 heights” but are still running above the 2 percent target. Progress towards that target “over the past two years has been modest.” His description of CPI and PCE measures as imperfect begs the question of what measures are better. Fortunately, he created a task force to figure it out by end of year. In the meantime, there are revisions to the PCE index coming at the end of September that will likely lower current PCE by at least a smidge. Certainly not down to the low 2s year-over-year, but it will be something.

Warsh wrapped up the speech by stating that the country needs the Fed to “think carefully and act wisely.” Is it wise to stand pat at the September meeting to see what the PCE revisions bring about? Or perhaps wisdom means holding off until after the midterm elections before embarking on a tightening regime, simply to avoid claims of “improper” political influence. Imagine those texts…