Yields soar on Warsh’s hawkish tone. The yield curve bear flattened following Fed Chair Warsh’s speech at the Jackson Hole Symposium this morning, as he reaffirmed his commitment to bring inflation back towards the Fed’s target. Futures markets now see a rate hike at the upcoming FOMC meeting as 58% likely. The 2-year yield closed 12 bps higher at 4.35% (up 11 bps on the week), and the 10-year yield closed 5 bps higher at 4.73% (flat on the week). Meanwhile, semiconductor stocks dragged equities down, with the S&P 500 and NASDAQ closing 0.25% and 0.52% lower, respectively.
Fed Chair Warsh vows to fight inflation. Fed Chair Warsh spoke hawkishly in his speech at the Jackson Hole Symposium today, saying that the Fed “has work to do” to bring inflation down to the 2% target, a goal he described as “firm” and “fixed.” Warsh did not explicitly share whether he would be in favor of a rate hike at the September FOMC meeting, but he said that he would not describe current financial conditions as restrictive and policy rates are the “predominant tool” for delivering on the Fed’s dual mandate. He closed out his speech saying, “I stand here today committed to a discipline, not to a decision.”
Consumer sentiment drops as economic outlook deteriorates. University of Michigan consumer sentiment gauge came in at 51.7 for August, the first decline in three months, though slightly improved from its preliminary reading and estimates of 51.0. The decrease was primarily due to worsening economic outlook, despite easing short-term inflation expectations. Joanne Hsu, the survey director, shared in a statement that, “In addition to the pocketbook issues that have been central to consumers’ views of the economy, they are increasingly worried that prospects elsewhere in the economy could be weakening.”
