What happened
Ken Rogoff, a Harvard professor and former chief economist at the International Monetary Fund, said Federal Reserve Chair Warsh's Friday speech at Jackson Hole sent a clear signal: if inflation data does not improve, he will raise interest rates. Rogoff said he was somewhat surprised, and as a political outsider he thought delaying a hike until after the midterm elections might have been better for the Fed as an institution.
Rogoff said a September rate increase would trigger fierce attacks from President Trump, who has repeatedly said U.S. rates should be among the lowest in the world and has urged the Fed to cut rates to 1%. Trump previously clashed with former Fed Chair Powell over rates and threatened to fire him multiple times.
Rogoff said Warsh's speech clearly opened the door to a September increase provided data supports it, and that data would need to be quite strongly supportive. He called it Warsh's best speech since becoming Fed chair and said it cleared up confusion left by the July press conference, when Warsh repeatedly cited sharply rising bond yields when asked about using rate hikes to curb inflation.
Why it matters
The remarks highlight the political tightrope the Fed faces: raising rates could demonstrate independence, but with democratic institutions under stress and President Trump likely to react forcefully, the consequences are hard to predict. Rogoff warned that if the president suffers a heavy midterm defeat and the Fed hikes in September, the central bank would face very significant political pressure.
Rogoff's comments also tie Fed policy to broader fiscal concerns. He said the recent rise in real yields looks like a return to normal, while structural factors such as demographics, wealth inequality and global wars keep upward pressure on rates. He also criticized Treasury Secretary Bessent's debt strategy, saying the bond market reacted badly to the plan to double long-term Treasury buybacks and that Bessent appears to be betting on lower future rates.
Key facts
Warsh's Jackson Hole speech signaled he would raise rates if inflation data does not improve.
Market odds of a September rate hike jumped from 35% to 60% after the speech.
President Trump has repeatedly said U.S. rates should be among the lowest globally and has urged the Fed to cut to 1%.
What to watch next
Whether upcoming inflation data offers the strong support Rogoff says would be needed for the Fed to move in September.
How President Trump and the midterm political environment react if the Fed does raise rates in September.
How Treasury Secretary Bessent's debt management strategy and long-term yields evolve, with Rogoff expecting 10-year yields to be higher in a year.