Hawkish Comments within Warsh Speech at Jackson Hole Lends Support to Dollar in Spite of Other Negative Forces
August 28, 2026
The much-awaited keynote address by Fed Chairman Warsh at the annual Jackson Hole Symposium included these remarks about inflation:
While this summer’s PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved. The data also show moderate wage growth. But in tracking underlying inflation, wage growth has not proven a reliable indicator of future inflation for a very long time. The recent rise in overall commodity prices also bears watching. What we need to judge is whether trends indicate upside inflation risks. he thing about market measures of inflation expectations in economic history is that they tend to look strong and durable until they don’t. Those expectations are not pushed around easily, and right now they are well anchored. But they must be closely minded. It’s the Fed’s job to make sure that inflation expectations do not get unanchored. It matters, too, whether the inflation readings of the past five-plus years have seeped into expectations.
Two other storylines of this final Friday in August could have had negative implications for the dollar today. Number one, the war between the United States and Iran began February 28, exactly a half year ago, and a news headline in the New York Time concisely summarizes where things stand: “Six months in, Iran’s regime stands, and U.S. goals remain unmet.” And number two, preliminary benchmark revisions by the U.S. Labor Department of non-farm payroll employment show lower job levels than reported initially.
In financial market activity, the weighted dollar index nonetheless is 0.3% firmer, with gains of 0.5% relative to the peso and Swiss franc, 0.4% against the euro and sterling and 0.3% versus the yen and Canadian dollar. Ten-year sovereign debt yields are higher, led by a four-basis point increase in the Japanese JGB . There have been two-bp rises in British and Swiss yields and a single basis point in the U.S. Treasury and German bund yields. Most Asian stock markets closed higher, but a 1.8% drop in the South Korean Kospi was a notable exception. European stock markets have gained more today than major U.S. equity barometers. Bitcoin’s price is 1.7% lower. Gold and silver have dropped, too. At $82.77 per barrel, WTI is 0.7% lower, amid unconfirmed reports that traffic through the Strait of Hormuz has picked up somewhat.
Among a cornucopia of late month data releases around the world, some of the highlights follow:
Canadian GDP, which stagnated in the previous two quarter and fell by 0.1% between the first quarters of 2025 and 2026, revived 0.8% in this year’s second quarter with decent contributions from consumption, business spending and net foreign demand. The punitive U.S. tariff hikes just imposed against Canadian goods casts a shadow over this quarter, however. In fact, monthly GDP in July was flat.
Economic sentiment in the euro area rose 1.3 index points to a 7-month high of 98.4 this month. All major components improved, including 7-month highs in employment and the service sector, a 6-month high in consumer sentiment, and a 2-month high in construction.
Consumer price inflation in Tokyo, a leading indicator of the national trends, accelerated in August to 1.9% overall and 2.0% excluding food and energy.
Among other price figures reported today, Spanish consumer price inflation of 4.3% was at a 49-month high in August of 4.3%, up from 3.6% in July and 2.3% in January and February. French consumer prices climbed 0.7% on month and 2.4% on year in August, most since May. Malaysian producer price inflation of 9.75 in July was its highest in 49 months and versus -3.4% as recently as February. Austrian PPI inflation of 3.3% in July represents a 38-month peak. Such had been in sub-zero territory for 30 of 32 months through this past February. Singapore producer prices in July were 33.4% greater than a year earlier. Brazilian PPI inflation slowed to a 3-month low in July but was still at a lofty 19.4%.
French real GDP last quarter has been revised from 0.2% estimated initially to zero percent and consequently was only 0.7% above its year-earlier level.
German import price inflation in July of 6.8% following 6.1% in June matched May’s 41-month high.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Canadian GDP, Euroland economic sentiment, German import prices, Spanish and French CPI, Warsh remarks on U.S. inflation
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