The Odds of a September Rate Hike Have Nearly Doubled, Courtesy of Fed Chair Kevin Warsh -- Here's What He Just Said

Fed Chair Kevin Warsh's August 28 Jackson Hole speech sent September rate-hike odds surging from 35% to 60%, as he signaled the central bank's inflation fight is far from over. Warsh told markets that inflation has run above the Fed's 2% target for 65 months and emphasized the Fed must see price pressures moving toward its objective "at sufficient speed" before pausing.

The hawkish pivot marks a sharp reset for traders who had priced in a more accommodative stance. CME, which operates the interest-rate futures markets where these probabilities are determined, saw a dramatic repricing as Warsh's remarks landed. The speech underscored that the Fed views persistent inflation as its predominant concern, overriding growth considerations.

Higher borrowing costs from another hike would pressure equity valuations, particularly in rate-sensitive sectors and momentum trades that have driven recent gains. The AI-fueled rally faces a fresh headwind if the Fed follows through in September.