Warsh Jackson Hole Remarks Lift December Rate Hike Odds to 48 Percent as US-Iran Clashes Resume

Warsh stated that persistent services inflation and resilient labor demand warranted keeping policy restrictive longer than markets had priced. Fed funds futures immediately repriced: the December contract moved from 37 to 48 percent odds of a hike by year-end. Treasury two-year yields rose 11 basis points in the session after the speech. Primary records show the FOMC’s July dot plot already embedded two 2024 hikes; Warsh’s intervention aligned private-sector forecasts with that median. The same weekend saw US Central Command confirm strikes on Iranian-linked targets in eastern Syria, the first direct exchange since January 2024. Rate-hike expectations and Middle East escalation interact through the dollar and oil. A firmer dollar tightens financial conditions for dollar-debt sovereigns while higher oil prices add to US headline CPI, reinforcing the case for tighter policy. Both effects are visible in the same futures strip that moved after Warsh spoke. Next data points are the August PCE release on 30 August and the September FOMC. Any CPI print above 2.6 percent year-on-year would lift the December hike probability above 60 percent under current futures-implied reaction functions.