Fed's Warsh flags rising alarm over price stability data

Key excerpts from the Federal Reserve official's remarks include:

• Confidence is required that core inflation is progressing toward the target, or additional steps will be needed
• He would find it difficult to characterise overall financial conditions as tight
• Although this summer's PCE and CPI figures came in better than anticipated, they do not indicate that fundamental trends have seen a real improvement
• The broader economy appears to have gained strength
• Credit and lending markets display little evidence of policy tightening
• Inflation expectations tend to appear anchored until they are not, and must be carefully tracked
• Business investment is expanding quickly

“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” he stated. His current stance appears to be a lack of confidence, though he is not flagging it emphatically.

Before the speech, markets saw a 33% probability of a rate increase on September 16. The S&P 500 had gained 7 points, while the yen traded at 159.57.

In my view, his remarks lean heavily toward a rate hike.