US Federal Reserve Chairman Kevin Warsh is set to deliver a speech at the Kansas City Fed’s annual research symposium in Jackson Hole, WY on Friday 8.28.

Over the years, market participants have been glued to this mountain town as this symposium always seems to come at an important time for markets. This year is no exception and it is highly likely markets will parse every word of Warsh’s speech and react accordingly.

As this newsletter is being published before the speech, we can’t look at what was said. However, we can discuss the two main reasons this event is getting so much attention yet again this year.

The first reason this speech will be “must see TV” for markets is due to the change in communication policy under Fed Chair Warsh. Under past Fed chairs, there was very frequent (perhaps too frequent?) communication and signaling to the markets by not only the Fed Chair but also by the Fed governors.

Fed Chair Warsh has taken the stance that he will not provide guidance about future decisions, he will limit the ability of his governors to do the same, and he will also not provide a framework for how he will evaluate policy. This approach lets the market figure things out on its own based on the data available. This represents a major change and one that markets are continuing to react to. After the July press conference (in which Warsh declined to answer questions on inflation), rates moved higher in response. Given this new strategy of less communication, market participants will be relying upon the tone of the speech and any clues regarding the path of rates more than ever.

The second reason the speech will be closely watched is the recent action in the bond market. Rates have risen rather sharply in recent weeks across the yield curve. While no one knows the exact driver of this change (see today’s Client Question post for some possible causes), one cause getting renewed attention is inflation.

The question regarding inflation is whether it’s being caused by “one off” events (including the conflict in the middle east and tariff/trade concerns) or is it being caused by the economy in general that continues to run “too hot.” If it is the former, one could argue inflation will fall when those issues resolve. However, if it is the latter, one could argue that Fed action might be necessary.

As observed in the interest rate moves of late, longer run inflation expectations are again trending higher. With inflation being one part of the Fed’s dual mandate, markets will be interested in knowing the Fed’s reaction to recent movements in interest rates and whether there is any appetite to address inflation with rate hikes. The bond market backdrop was made even more complex last week by Treasury Secretary Scott Bessent’s announcement that the Treasury would be increasing its buyback program, ultimately allowing it to alter demand/rates at various points along the yield curve. The Treasury’s actions might lower rates but it could also influence inflation as it will lead to more cash being put back into the system.

Clearly, there will be much to discuss in Jackson Hole this week Friday. I for one will be watching!

Onward we go,