Fed Chair Kevin Warsh, Trump’s Pick, Hints at Upcoming Rate Hike Amid Inflation Concerns

Federal Reserve Chairman Kevin Warsh, the man Donald Trump handpicked to run the central bank, used his first Jackson Hole speech Friday to say interest rates may have to go up — the opposite of what Trump has spent the summer demanding.

Warsh told the Kansas City Fed's annual gathering in Wyoming that the Fed still needs to do more to tame inflation, describing the moment as a "hinge point in history" as artificial intelligence reshapes the economy, according to a text of his prepared remarks carried by Axios. He called the Fed's 2% inflation target fixed and non-negotiable, and said short-term interest rates remain the central bank's main tool for hitting it.

That is not what Trump wanted to hear, but he has not turned on Warsh over it. At a cryptocurrency summit at the White House on Aug. 19, the president praised Warsh's job performance, then pinned the blame for high rates on the rest of the Fed's board, calling it "a political board" stacked with holdovers and his own appointees who keep voting to raise rates, according to the Washington Times.

Warsh took over the Fed in May, succeeding Jerome Powell, whom Trump spent years pushing for faster cuts. His own start has been rocky: a muddled July 29 press conference left bond traders guessing about his intentions and sent long-term Treasury yields higher. Since then he has set up five internal task forces, staffed with outside academics and business figures, to review everything from the Fed's communications to its inflation framework.

Hong Kong's own borrowing costs move in step with the Fed's under the city's linked exchange rate system, so wherever Warsh takes rates next eventually shows up in HIBOR and local mortgage payments.

The Fed does not meet again until Sept. 15-16, and Warsh gave no sign Friday which way he will vote. He did make one thing clear: he still won't tell markets what would change his mind.