Markets put the odds of a Federal Reserve rate hike on 16 September at about 30% before Kevin Warsh spoke at Jackson Hole. Three days later, on the day this episode was recorded, they were near 67%.
Two earlier press conferences from the new Fed chair had left the bond market unimpressed. The third outing moved it, and it moved it toward tighter policy rather than easier.
"So, the inflation fight is not over. That's full stop."
Jeff Roach is chief economist at LPL Financial. He reads the end notes of a Fed chair's speech to work out what the committee is reading, and he said the papers Warsh cited there were negative on forward guidance.
I listened to the full episode so you can skip it. 24 minutes of audio, 12 minutes of reading.
Here are the 11 takeaways that matter.
👤 Guest: Jeff Roach, chief economist at LPL Financial, who co-wrote the firm's mid-year outlook on Fed policy and rate volatility
🎙️ Host: Lawrence Gillum, chief fixed income strategist on the LPL Research team, hosting this week's episode
📰 Published: 1 September 2026 on YouTube (LPLResearch) · recorded 31 August 2026
🔴 YouTube | 🟢 Spotify | 🟣 Apple Podcasts | ⏱️ 24 min | ✅ Time saved: 12 min
Key Takeaways
The Fed chair used Jackson Hole to say the inflation fight is not finished, and the dollar rallied on it
Inflation should start with a 2 by November as tariff effects fade and strong 2025 prices drop out of the comparison
September is close to a 50-50 call, and the economic data on its own tilts toward a hike Market-implied odds went from about 30% before the speech to around 67% after it
If the Fed does hike, Roach expects one hike and then a hold
Forward guidance has not disappeared; it has been spread across more voices District presidents still speak, and the summary of economic projections is still published
The monthly payroll number that keeps unemployment stable is far lower than it used to be Roach puts private-sector break-even at roughly 35,000 jobs a month
Intervention in a market without a change in fundamentals does not hold The yen has weakened back toward 160, and Treasury yields are back where they were before the buyback announcement
1. Jackson Hole Sets Doctrine
Gillum opened by explaining what the symposium is. It is not a meeting of the rate-setting committee, he said, but it matters to economists watching for changes inside the Federal Reserve and in how other central banks respond to events.
He gave two precedents from past symposiums: Ben Bernanke's speech on quantitative easing, and Jerome Powell's speech on average inflation targeting a few years back
Gillum said he had gone in expecting a speech about process improvements at the Federal Reserve rather than one built around inflation, and that the inflation discussion came anyway
Roach placed the event: it is hosted by the Federal Reserve Bank of Kansas City, one of the 12 districts in the system, which has been hosting it since Paul Volcker's time
Roach said the value of the venue is that it is not a policy meeting. "It's more of philosophy perhaps explaining a new era of how they're going to manage policy."
His own method is to read the speech's references rather than only its text. The chairman's speech is published on the Federal Reserve website and carries notes at the end naming the papers and views behind it "Clearly some of the papers that were highlighted in Warsh's speech were papers that were pretty negative on forward guidance."
2. Warsh Put Inflation First
Gillum said the absence of forward guidance had been a real point of contention with markets, alongside questions about the committee's reaction function and what actually matters to it in the inflation fight. Warsh made clear the interest rate is the Fed's primary tool, and rate hike expectations rose.
Roach's first takeaway was that the inflation fight is not finished. "So, the inflation fight is not over. That's full stop." He said that was important for investors to hear
The chair returned to the point repeatedly, according to Roach. "He also repeatedly emphasized underlying inflation pressures are too high." They have to get to the 2% target
The dollar rallied on that news, Roach said
The rest of Warsh's read on the economy was upbeat. "We got strong capital spending from AI buildout, infrastructure buildout." He added robust earnings growth and narrow credit spreads to the list Roach said those things together paint a fairly optimistic and encouraging picture of the economy
3. The Push to Better Data
Roach said Warsh referenced the Fed's task forces here and there in the speech, one of them on communications
The one Roach finds more interesting is the data improvement task force, one of the five. "It's co-headed by a former CEO of Walmart." He expects very practical takeaways from it
The call-out he singled out was the pivot toward real-time indicators, which he said is an opportunity for policy makers to improve how and where they get their information
Gillum agreed, and said LPL has discussed internally that there are far more ways to collect data now than relying on a few survey releases
4. Below 3% by November
Roach expects inflation to run too hot in the near term. "Well, I think in the near-term the answer is yes, inflation's going to be running above 3% headline and core way too hot for where policy makers want"
He expects the October and November data, near the end of this year, to show improvement, for two reasons "Part of that's going to be a fading of tariff impacts." The other is the comparison: pricing pressure in the same months of 2025 was strong, which he said will make the year-over-year calculations look better
His forecast is that inflation starts with a 2 by November. "I think we're going to have a two handle by the time we get to November." He called that encouraging for investors
Until then it is hot enough that he sees a pretty strong probability of a hike at the September or October meeting
5. September Is Near 50-50
Gillum set out the market pricing and then asked Roach to commit.
Going into the symposium, "Markets had priced around a 30% chance of a rate hike." After it, the number went above 50%, which Gillum said was less than he expected given Warsh's comments "We're around 67% chance of a rate hike in the September 16th meeting."
Roach would not pick a side. "It's a coin flip."
He noted they were recording on the last day of August, and that the last day of July looked the same. The speech moved expectations back to the distribution of a month earlier, after dramatic moves over two or three weeks
The economic data on its own argues for tighter policy, he said. Strong consumer spending, strong capital spending, and "4.1% unemployment, does it mask underlying stresses?" — with very low unemployment insurance claims alongside the low unemployment rate "So, maybe a slight tilt toward hike."
What stops him committing is everything that is not economic data: how much the government is paying on interest, geopolitical pressures, and other non-economic pressures
6. Treasury Against the Fed
Gillum described two arms of policy pulling in opposite directions. Treasury Secretary Scott Bessent has been trying to keep yields from moving too high, too fast with his buyback proposal, while Warsh has talked about the need to potentially hike rates
A hike raises the Treasury's own debt servicing expenses, Gillum said, which is why the two positions collide
He called it an interesting dynamic to watch, with the competing interests playing out in the markets
Roach had already put the government's interest bill on his own list of the pressures that make September hard to call
7. The Committee Could Split
Gillum said the last meeting produced a split vote, 9 to 3, in favor of a pause. He asked whether September could produce something like a 7-5 vote, either for a pause or for a hike, and how divided the committee is
Roach said a tighter vote would not surprise him. The chairman, he said, likes what he calls "a good family fight around the conference table" "I wouldn't be surprised at all if we had a more tighter votes."
The trade-off Roach drew: seen from outside the Fed, less pressure toward groupthink and members encouraged to bring their own views is a good thing
In practice it makes consensus harder to find, and can produce several people dissenting for different reasons, which he said has happened before
8. Guidance Is Not Fully Gone
Gillum said he and Roach wrote about this in LPL's recent mid-year outlook: no forward guidance, plus wider dispersion within the committee, means interest rate volatility is going to be a lot higher, and has been He pointed to the round trip in pricing for a Fed funds rate hike, and said the Treasury market has done the same. "This is really the new normal, right?"
Roach pushed back on the framing. "In some ways we still are getting forward guidance meaning we know the tilt on the chair." District presidents will still talk their mind, and the summary of economic projections is still published through the year
What may go is the chair's own dot on the dot plot, Roach said; other projections continue, so the picture is less clear rather than absent
Gillum's reading of why hike expectations did not rise further: instead of one consensus view of forward guidance, investors may now be getting 12 individual opinions about where rates are going
9. Jobs Week and Wages
Gillum asked what Roach expects from jobs week and the JOLTS labor market data, and whether it would meaningfully shift the rate hike conversation
Roach said only an unusually large surprise would move it, putting the bar at a move outside two standard deviations
The previous month's payrolls were suppressed by local educational payrolls, he said
The payroll growth needed to hold unemployment steady is now low by historical standards. "Private sector payrolls are still humming around that break even number of somewhere around 35,000 a month on average." He defined break-even as how much the economy needs to add to its payrolls to keep the unemployment rate stable, and said that number is a lot lower than it has been historically
His expectation for the August report, due the first Friday of September, is around 50,000 to 60,000, with a very low unemployment rate that he thinks may tick up only by the end of the year A strong enough, stable enough number keeps the hawks arguing for a hike in September or October, he said
On wages he sees no pressure on prices. Unit labor costs have eased considerably, a chart he showed in the mid-year outlook webinar, and he treats them as a good leading indicator for the wage side. "I don't think we're going to have much upward pressure from wages." He put the hot inflation reads down to tariffs and to strong demand for services instead, naming increases in insurance and financial services
10. One Hike, Then a Pause
Gillum asked whether a September hike would be one and done or the start of a new hiking campaign
Roach said one and done. "I think it'll be one and done." He described a steady state — growth in the economy, hot inflation — with many voting members having argued for wait-and-see because they expect the inflation pressures to dissipate
His picture of the outcome is that the committee does the obligatory hike and then holds, waiting for the balance of risks to become more neutral, with inflation still the focus and still not at the 2% target
Gillum's market read is that this is already in the price. Market-implied inflation expectations still look relatively range bound, so markets show no real concern about inflation becoming unanchored "And importantly, markets have really priced in a full rate hike by the end of this year and a 50% chance of a second rate hike this year."
"So, markets have priced in a lot." A hike in September, October or December should not produce a big reaction in fixed income, equities or currencies; something more hawkish than that would
Roach tied it back to the currency. The dollar rallied after the speech against a number of major currencies including the yen and the Canadian dollar, which he said is in line with markets expecting the Fed to keep its independence and its credibility in the inflation fight
11. Interventions Don't Last
Asked what else he is watching, Roach named global markets and the economies of Asia and Europe
He connected Bessent's buyback program to an earlier intervention by policy makers in Japan, carried out in conjunction with the US, though he said the magnitude of the US participation was pretty weak
The lesson he draws is that intervention without a change in fundamentals fails. "But it's just important for our listeners to remember when you try to intervene without fundamental changes, those interventions just don't last."
He said the effects of the most recent yen intervention did not last long, and the yen has weakened again close to the 160 level that policy makers treat as an important marker
Gillum said the Treasury market tells the same story: after Bessent's announcement, yields have crept higher and back to the levels they were at before it
Bonus Insights
Roach opened by joking that the mountain air may have helped clear some of the brain waves, and said Warsh made very similar points to his earlier appearances, just in a better way
Roach said the fear that attached to Warsh's nomination has not been borne out. "Yeah, I think it's interesting when you think what people were nervous about when the president nominated Kevin Warsh, there was a lot of concern well Warsh is just going to come in and be like Stephen Miran." "Very different individual and certainly Warsh has seemed to find his footing and calmed some of the fears I think at this point."
Gillum said Warsh took over as Fed chair in May and that the interest rate environment has been volatile ever since, with two earlier press conferences he called uninspiring before this one
Roach's bottom line is that the economic data on its own argues for tighter policy, but the September decision is close enough to even that he will not call it — and that if the Fed does hike, it stops there.
Products, Companies & Tools Mentioned
Federal Reserve (The subject of the conversation; Roach said its chairman put underlying inflation pressures and the 2% target ahead of everything else at Jackson Hole)
Federal Reserve Bank of Kansas City (One of the system's 12 district banks, and the host of the Jackson Hole symposium since Volcker's time)
U.S. Department of the Treasury (Scott Bessent's buyback proposal, which Gillum said is aimed at keeping yields from moving too high, too fast)
Books & Resources Mentioned
Warsh's 2026 Jackson Hole keynote (Published on the Federal Reserve website with its references at the end, which is where Roach said the papers highlighted were pretty negative on forward guidance)
The Federal Reserve's five task forces (Roach named the one on communications and the data improvement task force, which he said is co-headed by a former CEO of Walmart)
LPL Research Midyear Outlook 2026 (The publication Gillum said the two of them wrote on the lack of forward guidance and the widening dispersion inside the committee)
Summary of Economic Projections (Roach's evidence that some forward guidance survives — it is still published through the year even if the chair withholds his own dot)
JOLTS (The labor market data Gillum flagged for jobs week, alongside the August payroll report due the first Friday of September)
If this was worth your time, send it to someone who has to have a view on this.
Get the latest market chatter as it happens: