Breaking Down Warsh's First Speech at Jackson Hole

Summary

Bloomberg Odd Lots hosts Tracy Alloway and Joe Weisenthal break down Fed Chair Warsh's first Jackson Hole speech. They highlight the explicit PCE mention, remaining reaction-function uncertainty, and Warsh's signal that policy may not be restrictive enough, which drove two-year yields. They also discuss the missing productivity boom and Warsh's unusual focus on AI tokens.

• Warsh's Jackson Hole address was unusually long at around 3,600 words.
• The speech explicitly mentioned Fed attention to PCE inflation, which markets wanted.
• Hosts discuss remaining uncertainty around the Fed reaction function and the subjective 'sufficient speed' inflation language.
• Joe Weisenthal interprets Warsh as saying policy is not restrictive enough and inflation is moving the wrong direction, implying possible rate hikes.
• The two-year Treasury yield moved on the perceived rate-hike signal.
• A productivity boom is seen as a potential deflationary escape, but it is not yet visible in actual data.
• Warsh also spent three paragraphs on AI tokens, seen as a possible factor of production.