Fed Chair Warsh Signals Rate Hike Risk, Dollar Holds Near Two-Week High

TLDR

• Fed Chair Kevin Warsh signaled more rate hikes may be needed if inflation does not fall to 2%
• Markets now price in a 58% chance of a September Fed rate hike, up from 40% a week ago
• The dollar index dipped slightly to 99.53 but remains near its strongest level since August 17
• The Japanese yen weakened past 160 per dollar before recovering slightly to 159.57
• US military strikes on Iran’s Larak Island pushed oil prices up 2.5% to $90.21 a barrel

The dollar eased slightly on Monday but stayed close to a two-week high after Federal Reserve Chair Kevin Warsh made hawkish comments at Jackson Hole on Friday.

Warsh said the Fed will “have work to do” if policymakers do not gain confidence that inflation is moving back toward 2%. This was his clearest signal yet that further rate hikes could be on the table.

Markets responded quickly. The probability of a September rate hike jumped to 58%, up from around 40% just a week ago. Yields on 2-year US Treasury notes held near a one-month high.

The dollar index fell 0.11% to 99.53 on Monday. It had hit 99.73 on Friday, its highest point since August 17.

… Continue reading the full article at the original source below.