September Hike Odds Jump to 60% After Warsh's Inflation Warning
U.S. markets are closed for the weekend; the next session opens Monday, August 31 at 9:30 a.m. ET (4:30 p.m. in Istanbul). The story carrying into it was priced Friday morning: Fed Chair Kevin Warsh's Jackson Hole address turned the September 16 FOMC meeting into one where a rate hike is the leading outcome.
Speaking at 10:00 a.m. ET, Warsh said inflation is running above the 2% target and that prices should be the Fed's predominant focus right now. On the summer data he said: "This summer's inflation data is better than expected, but do not tell me underlying trends have meaningfully improved." He offered no explicit guidance on the rate path, but paired with his line that the central bank "has more work to do," the market read it one way.
The repricing was immediate. Odds of a 25 basis point hike in September moved from the 33-35% range before the speech to roughly 60%, with Kalshi printing 59% intraday. The 2-year Treasury yield rose 10 basis points to 4.34% and the 10-year rose 4 basis points to 4.72%. The front end moving faster than the long end says what is being priced is near-term policy, not a shift in long-run inflation expectations. The dollar firmed, gold fell 2.0% to $4,509 an ounce, silver dropped 2.2% to $67.75, and bitcoin lost more than 2% toward $78,000.
The second story is tariffs. The administration's second round of semiconductor duties may extend beyond chips to goods that contain them — data center servers, laptops, gaming consoles — and per Digitimes the exemption shielding roughly $143 billion of server imports is now on the table. The Computer and Communications Industry Association argues the measure could cost about $90 billion in annual GDP and delay or cancel around 20% of data center projects planned through 2030. and fell on the report Friday and gave up an early gain to close down 3%; a phase-in period and exemptions for companies investing in domestic production are both under discussion.
