Warsh to deliver keynote Friday; markets watch for signals on inflation, rate path

'Honeymoon is over,' economist says as long-term yields surge and challenges mount

Fog settles over a valley beneath the Teton Range in Grand Teton National Park near the site of the Kansas City Federal Reserve's 2025 Jackson Hole Economic Symposium in Jackson Hole, Wyoming, on Aug. 23 last year (local time). [Reuters]
Fog settles over a valley beneath the Teton Range in Grand Teton National Park near the site of the Kansas City Federal Reserve's 2025 Jackson Hole Economic Symposium in Jackson Hole, Wyoming, on Aug. 23 last year (local time). [Reuters]

The Jackson Hole Economic Policy Symposium, which draws the world's top central bank governors and leading economists, opens Thursday (local time) in Jackson Hole, Wyoming, for a three-day run.

Organized by the Federal Reserve Bank of Kansas City, the annual gathering has long moved global financial markets, as remarks by central bank chiefs — including those of the Federal Reserve — are closely read for signals on future policy direction. Bank of Korea Governor Shin Hyun-song will attend on behalf of South Korea.

This year, all eyes are on the keynote address by Fed Chair Kevin Warsh, scheduled for 8 a.m. Friday (11 p.m. Korean Standard Time). It will mark Warsh's first appearance at Jackson Hole since taking office in May, and market observers say his early-tenure honeymoon period is over and a real policy test has begun.

Warsh has signaled that he wants to limit forward guidance on the future rate path in the Fed's communications with markets.

His argument is that markets should judge Fed policy based on economic data and financial market movements rather than explicit rate projections — but some critics say this approach has itself heightened market uncertainty. The most closely watched question heading into Friday's speech is how Warsh diagnoses the current elevated level of inflation.

US inflation remains above the Fed's 2 percent target, and a range of upward price pressures have piled up: energy costs driven higher by the US-Iran war, and a trade war with Canada, among others.

Tension in the bond market has also intensified. A widening fiscal deficit, rising government bond supply and an AI investment boom have combined to push the yield on the 30-year US Treasury to its highest level since 2007. Adding to the uncertainty, Treasury Secretary Scott Bessent has announced plans to double the size of the Treasury's bond buyback program.

Markets are also watching to see how Warsh assesses the rise in long-term yields and how he views the impact of the Treasury's bond buybacks on financial market conditions.

Warsh had initially been expected to focus his remarks on structural economic shifts — such as AI-driven productivity gains — and long-term policy challenges. But as inflation concerns and bond market instability have grown, pressure has mounted on him to clearly lay out the near-term monetary policy path and the reasoning behind it.

Anil Kashyap, a professor at the University of Chicago, told The New York Times that "the honeymoon is over," adding that markets expect Warsh to clearly articulate his framework for how the economy works.


yckim6452@heraldcorp.com