Kevin Warsh's first Jackson Hole keynote as Fed Chair was titled "In Our Time." He used it to mark his 100th day in the job, and he opened by telling the room what the speech was not. "You can call it an outline . . . you can call it a trail map . . . just don't call it forward guidance," he said (CNBC).
A New Discipline, Not a Decision
That is the headline for anyone waiting on a mortgage-rate signal. He did not give one. No September path. No “if inflation does X, we do Y.” He said he is committed to a discipline, not to a decision.
Forward guidance is the habit of telling markets, in advance, where rates are headed. The Fed leaned on it hard after 2008. Warsh’s view is that the practice has overstayed its welcome. In normal times it can create ambiguity in the name of clarity, lock the committee into a path, and set up a hall of mirrors: markets trade the Fed’s words, the Fed then reads those market prices as information, and both sides get surprised when the real economy turns. He also refused the consolation prize markets wanted, an explicit reaction function, because he does not think the economy is precise enough for a mechanical rule.
What he did lock in is the framework. The 2 percent inflation target, measured by PCE (that is the Fed’s preferred price index, a broad read on what households actually pay), is a firm, fixed target. It is not self-executing and inflation is not guaranteed to drift back on its own. Short-term interest rates are the main tool. Crisis-era extras, including leaning on the balance sheet the way the Fed did in the last cycle, should stay on the shelf except in a genuine crisis. Money creation is back on the watch list. And a quieter Fed, judged on results rather than a running commentary, is how he wants to be held accountable.
The View on the Economy and Housing
On the economy, he was more specific than he was on the next rate move. Labor looks like full employment to him. The jobless rate is 4.1 percent and has been stuck near there for a couple of years. Claims are very low. People who want to work are, by and large, working. Growth looks solid: business investment is running hot, a lot of it the AI buildout, corporate profits are up, and he said he would be hard pressed to call broad financial conditions restrictive.
He did name housing, with agriculture, as a sector showing strains. That is the part that matches what a lot of Phoenix buyers and sellers already feel. The overall machine is still moving. The house payment is the piece that has not gotten easier.
Inflation is the job he put first. Twelve-month PCE is 3.7 percent. The six-month pace is 4.1 percent. Summer readings came in better than expected, and he said that is not the same thing as the underlying trend getting better. More than half of the items in the PCE basket are still rising faster than 3 percent. Medium-term inflation expectations are still anchored, which he treated as credit to the institution, and then he put the 65 months of too-high inflation squarely on the central bank.
His standard is simple. He wants to be confident that underlying inflation is moving toward 2 percent, clearly and at a sufficient speed. Otherwise the Fed still has work to do.
The market heard that as a bit more hawkish, even though he still would not pre-announce a hike. Bond yields jumped and then mostly came back. Same-day, a voting Fed president said she wants a hike now, and a jobs revision showed the last year of hiring was weaker than first reported, especially in the private sector. That is the tension. He is treating labor as full employment and inflation as the unfinished job. Mortgage rates will keep taking their cue from the data, not from a hint in Wyoming.
What This Means for Phoenix Buyers
If someone has a house they want and a payment they can live with, waiting on a speech was never the plan. One application, one credit report, and we shop the file across a few hundred lenders for the payment that actually fits.
https://www.federalreserve.gov/newsevents/speech/warsh20260828a.htm