Barclays forecasts two Fed rate hikes after Warsh Jackson Hole speech

Barclays forecasts two Fed rate hikes after Warsh Jackson Hole speech

Mon, August 31, 2026 at 4:04 PM GMT+3 2 min read

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Barclays now expects the Federal Reserve to raise interest rates at its September and December meetings, reversing a prior forecast of no changes through the remainder of the year, after Federal Reserve Chair Kevin Warsh delivered a hawkish address at the annual Jackson Hole symposium last Friday, according to Reuters.

The Wall Street brokerage described Warsh's speech as "notably hawkish" and said it offered an implicit case for further tightening, according to Reuters. Each of the two projected increases would amount to 25 basis points. The Fed's benchmark federal funds rate currently stands at a target range of 3.5% to 3.75%.

Barclays did note that near-term monthly inflation prints are likely to look considerably cooler than the longer-horizon gauges Warsh cited, but warned that base effects would undercut any apparent improvement in those annual measures before December. Traders are assigning a 60.4% probability to a September hike, CME Group's FedWatch tool showed.

Warsh's Jackson Hole address, his first keynote at the event as Fed chair, drew significant market attention as his clearest opportunity to fill what had been a deliberate communications void since he took office in May. Warsh told the symposium that policymakers would "have work to do" if they lacked confidence that inflation was returning to the Fed's 2% target. In his remarks, Warsh cast inflation as unacceptably elevated, judged prevailing financial conditions to be doing too little to restrain demand, and described the labor market as operating at or near full employment.

Warsh reinforced his opposition to providing explicit forward guidance, declining to spell out the conditions that would trigger a policy response. "I stand here today committed to a discipline, not to a decision," he said. He acknowledged that this summer's inflation readings came in better than expected but said they did not show meaningful improvement in underlying price trends. The 2-year Treasury yield climbed following the remarks, and traders raised the odds of a September rate increase.

The hawkish tone at Jackson Hole extended beyond Warsh. Earlier in the symposium, Cleveland Fed President Beth Hammack called for higher rates, saying inflation had run above the Fed's 2% target for more than five years and that financial conditions showed no signs of restriction. At the Fed's July meeting, the FOMC voted 9-3 to hold rates steady, with Hammack among those who dissented in favor of a quarter-point increase.

The Fed's next policy decision is scheduled for September 16.