Federal Reserve Chair Kevin Warsh raised expectations of another interest rate hike, saying the Fed would have “work to do” if policymakers were not convinced that inflation was moving toward the 2% target.

Following the Fed chair’s traditional speech in Jackson Hole on Friday, markets raised the odds of a rate hike as early as next month. CME data showed the probability of a September increase rising from 35% to about 50%.

US inflation has remained above the Fed’s 2% target for more than five years. Price pressures remained elevated in July, according to the central bank’s preferred inflation gauge. The core Personal Consumption Expenditures (PCE) index rose 3.3% year on year, unchanged from June.

Investors interpreted Warsh’s remarks as a signal that the Fed could take a more restrictive approach to monetary policy. He emphasized that inflation remained too high while the labor market was stable and output remained strong.

Several analysts expect the Fed to raise interest rates by the end of the year, although Warsh gave no specific guidance on its next steps.

(Reuters, bak)