The Fed Is Trapped

Volatility ahead of the Warsh dilemma

Kevin Warsh’s Jackson Hole speech created a paradox. He sounded hawkish, recommitting to the PCE index as the Fed's inflation guide. Yet markets are pricing only a 50% chance of a September hike. This is far below the near certainty we typically see before FOMC meetings.

The market is treating the upcoming FOMC as a coin flip, yet volatility remains remarkably subdued given the uncertainty around the outcome.