[New York Stock Exchange] Closes Lower on Warsh's Hawkish Remarks... Rate Hike Odds Rise Sharply

"Work to Do" Statement Highlights
September Rate Hike Prospects

The New York Stock Exchange fell on August 28 (local time) following hawkish remarks by Kevin Warsh, Chair of the U.S. Federal Reserve (Fed). His comments suggested that if there is no certainty that inflation is decelerating toward the target level at a sufficient pace, additional measures would be necessary, fueling the likelihood of a rate hike next month.

Reuters Yonhap News

On this day, the Dow Jones Industrial Average closed at 53,559.99, down 9.45 points (0.02%) from the previous session. The Standard & Poor’s (S&P) 500 Index fell 19.28 points (0.25%) to close at 7,711.76, and the Nasdaq Composite Index ended the session at 26,402.42, down 138.93 points (0.52%).

The New York Stock Exchange declined from the start of trading following remarks made early in the session by Chair Warsh. In his keynote speech at the Jackson Hole Economic Symposium held in Wyoming, he stated, "From the standpoint of one of our mandates, price stability, the relevant indicators have become increasingly concerning."

He added, "We must have confidence that the underlying inflation rate is moving clearly and at a sufficient pace toward the target," emphasizing, "Otherwise, we have work to do." Chair Warsh also remarked, "Overall, it would be difficult to describe the prevailing financial conditions as tight."

Following Chair Warsh’s comments, expectations of a rate hike in September have come into focus. According to the CME FedWatch Tool, the federal funds rate (FFR) futures market is reflecting a 57.5% probability that the benchmark rate will be raised from the current 3.50–3.75% to 3.75–4.00% at the Federal Open Market Committee (FOMC) meeting in September. This marks a sharp increase of more than 20 percentage points from 35.4% the previous day. The probability of a rate hold has decreased to 42.5%.

As expectations for a rate hike grew, U.S. Treasury yields rose. By the market close, the yield on the 2-year Treasury note had climbed 11.8 basis points (bp) from the previous session to 4.348%, marking the largest one-day increase since March. The 10-year yield was up 5.0 bp to 4.72%, while the 30-year yield rose 1.6 bp to 5.20%.

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