Traders have sharply raised the odds of a Federal Reserve rate increase next month after Chair Kevin Warsh used his Jackson Hole address to signal that policy remains insufficiently restrictive while inflation runs above target. The probability implied by futures for a September move jumped to 57 percent from 30 percent before the speech, with October pricing at 70 percent and December approaching 90 percent, according to the Fed's own data.

The odds shift

Warsh told the symposium that the central bank would "have work to do" unless officials gain confidence that underlying inflation is returning to 2 percent clearly and at sufficient speed. With the labour market stable, price pressures still elevated, and financial conditions showing little sign of restraint, he argued the Fed's predominant focus must remain on prices. The audience of global central bankers applauded the clarity but left unsettled by the absence of a roadmap for achieving it. Markets responded by pricing more aggression while retaining scepticism that the rhetoric will translate into action.

Goldman holds the line

Goldman Sachs maintains its base case for no change in September. The brokerage expects both core CPI and core PCE to rise roughly 0.2 percent month-on-month in August, a pace it believes supports a hold decision. A hotter-than-forecast CPI or PPI reading could force a rethink, but the firm's central scenario remains a pause. Goldman also argued that the recent run of softer inflation prints has not yet signalled a meaningful improvement in underlying price dynamics.

The inflation math

The brokerage highlighted that 54 percent of items in the PCE basket recorded price increases above 3 percent over the past year. That share sits well below the post-pandemic peak near 77 percent but remains materially above the 32 percent average seen in the two decades before the crisis. Tariff effects are cited as a partial driver of the elevated breadth.

What the strategists see

Nationwide's Mark Hackett said the market's modest reaction reflects Warsh's consistent reiteration of the 2 percent target rather than an incremental escalation. Investors had convinced themselves the stance would soften; the speech made clear it has not.