On Friday (August 28), Federal Reserve Chairman Kevin Warsh spoke at the Fed’s annual Jackson Hole symposium in Wyoming, expressing concern about persistently high inflation and suggesting that the Fed may need to raise interest rates if inflation does not ease further. In his speech, Warsh offered neither forward guidance (i.e., verbal hints about the Fed's policy intentions) nor explained what economic signals would trigger interest rate adjustments, the so-called policy response function. However, he acknowledged that inflation remained high: "Although this summer's inflation readings were better than expected, this does not mean that the underlying trend of inflation has substantially improved." He added, "We must be certain that the underlying level of inflation is moving clearly and quickly toward our policy target. Otherwise, we must act. This is our duty, our mission, and the mission we must uphold." Following the speech at 10:00 AM ET, the stock market fluctuated, and U.S. Treasury yields rose sharply. The yield on the highly monetary policy-sensitive 2-year Treasury note surged nearly 8 basis points (0.08 percentage points) to 4.31%, a new high since late July. According to data from the CME Group's FedWatch Tool, traders raised their probability of a rate hike at the September meeting to 55.7%, about 20 percentage points higher than the previous day. Heather Long, chief economist at the U.S. Navy Federal Credit Union, said, "Wash has opened the door for a Fed rate hike. A September hike is not guaranteed, but October or December is highly likely. Warsh clearly pointed out that the positive inflation data this summer does not mean that inflation has achieved a 'substantial' improvement. The bond market reacted quickly, starting to price in expectations of a rate hike." Warsh stated, "Market prices reflect confidence in our ability to achieve price stability. I can assure you that their judgment is correct." Besides considering inflation a top priority for the Fed and expressing concerns about inflation risks, Warsh is generally optimistic about the overall U.S. economy, saying that the economy "appears to be strengthening." Consistent with previous statements, the chairman mentioned the benefits of artificial intelligence, while also noting the robust performance of businesses and consumer spending. He acknowledged that job growth has slowed, but attributed it to the labor supply peaking. Warsh used this speech to elaborate on his policy philosophy, but deliberately avoided releasing specific signals about how to achieve the dual policy goals of "low inflation + full employment." In his written address to FOMC members, economists, and the media, he stated, "What I am adhering to here is a set of policy principles, not a set of predetermined decisions." Responding to external criticism , With inflation currently well above the Fed's 2% target, Warsh has faced considerable criticism for his ambiguous policy statements. He opposes the forward guidance previously used by the Fed, arguing that this mechanism excessively caters to the market, and that the market should interpret economic data itself, not rely on the Fed's rhetoric. Titled "Our Time," his speech began with a joke: "You can call this a draft, or a hiking trail, but please don't call it forward guidance." He believes this policy tool is "outdated." The core message of the speech is to reshape how the Fed views its relationship with the market and the public. Since taking office in May (Warsh mentioned this speech coincided with his 100th day in office), he has established several task forces to comprehensively review the Fed's various functions. The core idea is to reduce market over-reliance on every word of policymakers. He calls for a "more restrained and purposeful Fed." He stated, "The Federal Reserve plays a crucial role in the economy and markets. We possess powerful policy tools that can determine the direction of short-term interest rates. Market participants always try to predict our next move. But we cannot allow the market to trade primarily based on interpreting the Fed's statements." Warsh's speaking style differs from previous chairs. Past chairs often used the Jackson Hole symposium to signal interest rate trends, adjust policy frameworks, or outline entirely new monetary policy ideas. At last year's symposium, then-Chairman Powell signaled a possible rate cut, directly triggering a significant rebound in US stocks. No Policy Reaction Function Provided In just a few months in office, Warsh has focused on returning to the pre-financial crisis Fed model: sending fewer definitive signals to the market and reducing central bank intervention. Although the market has gradually adapted to the lack of forward guidance, it still expects Warsh to at least provide a policy reaction function, explaining what situations would trigger policy adjustments. On this point, he continues to refuse to make a clear commitment. In response to external criticism, he stated, "Since forward guidance is not applicable in normal times, shouldn't the Fed Chair at least provide a clear policy response function? For example, how will interest rates be adjusted when economic data is overheated or falls short of expectations?" However, Warsh insisted, "At least for now, our understanding of the economy is not that precise; the key factors influencing monetary policy also change over time." "During my term, my colleagues and I will strive to build more reliable models and more comprehensive rules to support policy decisions. But we must recognize reality: economic forecasting itself is still an ideal goal. In today's rapidly changing geopolitical, global supply chain, and technological landscape, we should remain humble about the boundaries of our understanding." In this speech, Warsh did not mention the Treasury repurchase program recently announced by Treasury Secretary Scott Bessant. This move seems to conflict with Warsh's desire for reduced government intervention in the market.