Barclays predicts two more Fed rate hikes after Warsh speech

Barclays just scrapped its call for a steady-state Fed and replaced it with something considerably less comfortable. The bank now forecasts two 25 basis point rate hikes before year-end, one in September and another in December, after Fed Chair Kevin Warsh used his Jackson Hole podium to remind everyone that inflation isn’t going quietly. The revision, published on August 31, marks a notable U-turn from Barclays’ prior expectation of no rate changes in 2026. And the bank isn’t alone in recalibrating. The CME FedWatch tool showed a 60.4% probability of a September hike following Warsh’s speech, a sharp jump from where markets stood just days earlier. Warsh draws a line on inflation Kevin Warsh, who succeeded Jerome Powell as Fed chair in late May, delivered what amounted to a policy warning shot at the Jackson Hole Economic Policy Symposium on August 28. His core message was blunt: if policymakers lack confidence that inflation is heading toward the 2% target, there is “work to do.” Warsh pointed to PCE inflation running at roughly 3.7% on a 12-month basis, nearly double the Fed’s target. He also stressed that the labor market is currently at full employment. The new chair emphasize...