Federal Reserve Chairman Kevin Warsh’s tough message on inflation has set up the central bank’s September policy meeting as a pivotal moment in its mission to tame prices. By warning in a speech that price pressures have yet to meaningfully slow, Warsh will have little option, analysts said, but to raise interest rates this year if inflation remains well above the central bank’s 2% target. Warsh didn’t signal that such a move is a done deal, and some Fed officials continue to say they are willing to wait and assess new data before making any decision.
A downside surprise in August’s consumer price index report, due Sept. 11, would deflate calls for tighter monetary policy, while an upside surprise could lock it in.
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