Mortgage Rates Expectations
Kevin Warsh Jackson Hole speech
Fed Chair Kevin Warsh delivered a notably more hawkish tone in his Jackson Hole remarks than in prior comments, while stopping short of an explicit commitment to hike rates.
Key points from the speech and coverage:
If the Fed lacks confidence that inflation is moving toward the 2% goal “clearly and at sufficient speed,” then “we have work to do”—language widely interpreted as leaving the door open to rate hikes.
He reaffirmed that the 2% target is firm and fixed.
He downplayed cooler summer inflation readings, stating they do not show that underlying trends have meaningfully improved.
He described the economy as strengthening, consumer demand as healthy, and broader financial conditions as not restrictive.
On the labor market, he viewed the unemployment rate near 4.1% and very low jobless claims as consistent with full employment.
He reiterated preference for a “quieter Fed,” arguing that forward guidance has overstayed its welcome and that large public commitments can constrain the Fed’s ability to respond appropriately.
Market reaction: Fed funds futures odds of a September hike rose from about 35% the prior day to the mid-to-high 40s / around 48–60% range depending on the exact snapshot, with markets pricing a high probability (near or at 100% in some descriptions) of at least one 25 bp hike by year-end. Bond markets were volatile but ultimately only slightly lower after settling, with yields rising then retracing toward unchanged.
Warsh framed his stance as commitment to a discipline rather than a pre-committed decision, consistent with his broader push against detailed forward guidance and traditional communication tools.
Cleveland Fed President Beth Hammack
Voting FOMC member Beth Hammack was more explicit, saying the Fed needs to hike now to address inflation. She noted concerns about the impact of elevated prices on household budgets even amid some recent slowing in inflation data. She also observed that a hike would likely not directly cool areas where inflation has been rising (such as energy) and could increase consumer debt servicing costs on credit cards, auto loans, and similar obligations. She has characterized policy as insufficiently restrictive and inflation as remaining well above target for an extended period.
Overall, Warsh’s speech raised the bar for staying on hold without delivering a firm September signal, while Hammack reinforced the hawkish wing of the Committee. Markets adjusted hike probabilities higher in response.
