Fed hawks are back

The week starts on a bearish note as oil prices are up on renewed tensions involving a US attack and retaliation from Iran this morning.

And the latter comes as the new Federal Reserve (Fed) Chair, Kevin Warsh, chose – in his much-awaited Jackson Hole speech on Friday – to emphasize that the US economy remains strong, the jobs leg of the economy has been resilient, while inflation remains high, and that if it doesn’t slow meaningfully, the Fed will have ‘more work to do’. He didn’t say whether he would back a Fed hike in September and didn’t respond to the Treasury’s efforts to tame the longer end of the yield curve by buying back bonds.

I wouldn’t say Warsh fully regained his credibility. He must walk the talk – and, at times, do things that would displease the White House.