Fed's Warsh: Inflation Still Not Cooling; 2% Target for 2026 Stays Front and Center

Federal Reserve Chair Kevin Warsh said inflation is not easing and reiterated the central bank's commitment to returning inflation to 2% by 2026. The latest 12-month Personal Consumption Expenditures (PCE) price index showed inflation running at 3.7% as of July 2026, well above the Fed's benchmark. Warsh's remarks signal that policymakers are prepared to keep policy restrictive until inflation moves decisively toward the goal, leaving the door open to holding rates steady or raising them if progress stalls. The federal funds rate currently stands in a 3.5% to 3.75% range. Markets took the message as a warning against imminent easing. Prediction-market pricing points to a lower probability of rate cuts at upcoming Fed meetings, with odds for a cut at the Oct. 28, 2026 meeting swinging sharply as traders weigh the path of inflation and the Fed's reaction function. Key takeaways: - Warsh emphasized inflation control, implying rates could stay elevated or move higher. - Market pricing indicates reduced expectations for near-term rate cuts. - The 2% target remains the anchor for future policy decisions. What to watch: Investors will focus on upcoming inflation releases, including PCE and CPI, for evidence that price growth is converging on 2%. Attention will also turn to guidance from key FOMC members, the September 2026 FOMC dot plot, and subsequent Fed communications for any shift in the policy outlook. Live prediction-market analysis is available via Vera. Sign up for Vera.