From the archive · Central Banks
A Fed at war with itself heads for Jackson Hole
Three dissents at the last meeting, governors openly split, a chair who won't show his hand, and a president demanding cuts while part of the committee argues for a hike. The minutes on Wednesday and the Jackson Hole symposium later this month will show which faction is winning.
Kevin Warsh took over the Federal Reserve in May with the policy rate at 3.50–3.75% and inflation above target for a fifth year, aggravated early in 2026 by the U.S.–Israeli war with Iran and its effect on energy prices. His first meetings have exposed a committee genuinely divided: the July decision to hold was carried over three dissents in favour of an immediate hike, including Cleveland Fed President Beth Hammack, and Reuters reports governors Christopher Waller and Lisa Cook have both said they would support increases unless inflation cools soon.
"The question is, how quickly do we need to deliver on that 2% objective," Hammack said last week, in remarks reported by Reuters — the hawks' case in a sentence. The doves' case is that the shocks doing the damage are the kind that fade: Richmond's Thomas Barkin noted that tariffs, oil and the AI investment boom account for much of the acceleration and "should pass." July's data leant their way — core CPI at 2.5%, producer prices flat on the month — and market odds of a September hike fell from a coin-flip to roughly a third.
Warsh himself has refused to spell out a reaction function, an omission American Banker reports has kept policy uncertainty unusually high, while President Trump publicly blames the chair's "hostile" colleagues for blocking the cuts he wants. Into that vacuum come two events: Wednesday's minutes of the July meeting, which will show how close the committee actually came to moving, and the Jackson Hole symposium on August 27–29, a chair's traditional stage for declaring a framework.
The Ledger's read: the substantive fight is not about September — it is about whether five years above target has started to move the public's expectations, which the University of Michigan survey puts at 4.3% for the year ahead. If the committee concludes it has, the glide-path argument dies and the hike case writes itself, whatever this month's prints say. Read the minutes for the word "expectations," not for the vote.
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