# Warsh Says Inflation Isn’t Slowing, Vows to Reach 2% Target

An episode of [Bloomberg Intelligence](https://invisiblenetwork.ai/podcast/326301337), 28 Aug 2026, 15 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7f534b8c-9e91-429a-b102-ae3c00090c6d/d2d4a5e3-0311-4125-89f0-b4b40112bcaa/audio.mp3?utm_source=Podcast&in_playlist=0ad812bf-fd15-4012-a18c-ae3c00090c76

Watch Paul and Scarlet LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Intelligence hosted by Paul Sweeney and Judy Lagrou *Guest reaction to Fed Chair Kevin Warsh’s speech from Jackson Hole* Guests: Tom Orlik, Chief Economist for Bloomberg Economics & Tom Keene, Bloomberg Surveillance Co-Anchor -Federal Reserve Chairman Kevin Warsh warned inflation isn’t meaningfully slowing and said policymakers must be confident that it is, otherwise the central bank has “work to do.” Warsh reiterated that policymakers will return inflation to their 2% goal, which he said is a firm and fixed target, and that financial conditions are not currently restrictive. Warsh said interest rates are the Fed’s “predominant tool” for achieving its mandate, but stopped short of signaling he would support an interest-rate hike when Fed officials gather in September. Also on this podcast: Nic Querolo, Bloomberg Municipal Finance Reporter, discusses the latest on the munis bond market. Investors in the high-yield municipal bond market are being picky and have shied away from some recent offerings, such as one from QCF/I, Inc. Higher absolute yields and tighter spreads between investment grade and riskier debt have given bond buyers fewer reasons to consider deals further down the credit spectrum. High-yield defaults have been in line with historical levels this year, with 33 first-time defaults totaling $2.81 billion, according to Municipal Market Analytics. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios.
[0:04] Speaker 2: Podcasts.
[0:05] Speaker 3: Radio.
[0:06] Speaker 4: News.
[0:09] Speaker 5: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[0:13] Speaker 5: weekdays at 10 a.m. Eastern on Apple CarPlay and Android
[0:16] Speaker 5: Auto with the Bloomberg Business App. Listen on demand wherever
[0:19] Speaker 5: you get your podcasts or watch us live on YouTube.
[0:24] Speaker 2: Mr.
[0:24] Speaker 6: Warsh finished with his speech out there in Jackson Hole.
[0:28] Speaker 6: I guess the feedback would be he got his message across.
[0:32] Speaker 6: He's hawkish, still focused on that 2% rate like a hawk.
[0:36] Speaker 6: And that's kind of the way that's the message. And
[0:39] Speaker 6: you better get used to it. Tom Orlick, he joins
[0:41] Speaker 6: us here, chief economist for Bloomberg Economics. Tom, love to
[0:43] Speaker 6: get your thoughts on this speech. You've heard them all
[0:47] Speaker 6: for many, many years. What'd you take away from this speech?
[0:51] Speaker 3: Well, great to be here, Paul.
[0:53] Speaker 2: So, Walsh went into this Jackson Hole with a challenge.
[0:58] Speaker 2: He has expressed a kind of philosophical opposition to the
[1:02] Speaker 2: idea of forward guidance, telling the market what to expect
[1:06] Speaker 2: from the Fed. But that was running into a collision
[1:11] Speaker 2: course with the market's demand for a Fed chairman who
[1:17] Speaker 2: can clearly articulate how the Fed is going to respond
[1:22] Speaker 2: to five years of inflation above target. So that was
[1:26] Speaker 2: the tension heading into this meeting. Now, in his speech,
[1:31] Speaker 2: Walsh reiterated his philosophical opposition to forward guidance. He said
[1:36] Speaker 2: he doesn't like it. But he did provide the market
[1:41] Speaker 2: with a little bit more clarity about how he's thinking
[1:44] Speaker 2: about inflation and what that means for the immediate rates outlook.
[1:50] Speaker 2: I'm going to get the quote a Financial conditions aren't
[1:56] Speaker 2: currently restrictive. I don't believe, I don't see the trend
[2:02] Speaker 2: for inflation moving clearly in the right direction. And if
[2:08] Speaker 2: the trend for inflation doesn't move clearly in the right direction,
[2:11] Speaker 2: we've got some work to do. Now, the markets interpreted that,
[2:15] Speaker 2: and we've interpreted that as a pretty clear signal that
[2:19] Speaker 2: the chances of a rate hike in September have moved up.
[2:24] Speaker 7: At the same time, we're looking at weaker retail sales.
[2:28] Speaker 7: We're looking at job numbers being softer than we'd like.
[2:31] Speaker 7: How difficult, in your opinion, is the Fed's decision if
[2:35] Speaker 7: growth keeps slowing but inflation stays above target?
[2:39] Speaker 2: So the growth numbers this year, certainly there are some
[2:43] Speaker 2: soft spots. Certainly there are some areas of concern. But
[2:48] Speaker 2: my view, and I think the Fed's view, is that
[2:51] Speaker 2: actually the main story of growth for the U.S. economy
[2:55] Speaker 2: this year has been a somewhat surprising resilience. All of
[3:00] Speaker 2: that excitement about AI, all of that CAPEX going into
[3:03] Speaker 2: AI data centers, offsetting the drag from the war in
[3:09] Speaker 2: Iran and higher oil prices. I think the collision course
[3:14] Speaker 2: which the Fed and Walsh may now be on is
[3:17] Speaker 2: not between their inflation mandates and concerns about softening growth.
[3:24] Speaker 2: It's between their inflation mandate and what President Trump wants, right?
[3:29] Speaker 2: President Trump has been very clear that he wants lower
[3:32] Speaker 2: interest rates. The midterms are coming. A Fed which hikes
[3:39] Speaker 2: in September ahead of the midterms is going to put
[3:42] Speaker 2: itself on a collision course with President Trump. And it's possible,
[3:47] Speaker 2: just speculating here, that Chairman Walsh could find himself with
[3:52] Speaker 2: some of those intense political problems, which his predecessor, Chair Powell, encountered.
[3:58] Speaker 6: Tom, another aspect that Mark was trying to get some
[4:02] Speaker 6: clarity on is the reaction function for this chairman in
[4:04] Speaker 6: this Federal Reserve.
[4:06] Speaker 8: Did we get any clarity on that point?
[4:10] Speaker 3: So, again.
[4:12] Speaker 2: Walsh has a kind of a philosophical view here that
[4:17] Speaker 2: the world is very complicated. It's more complicated than can
[4:21] Speaker 2: be captured in any simple rule, a reaction function, a
[4:25] Speaker 2: Taylor rule. So part of his speech was kind of
[4:28] Speaker 2: devoted to that kind of philosophical opposition to thinking or
[4:34] Speaker 2: being too kind of presumptuous about how much we can
[4:36] Speaker 2: understand about what's going on in the economy. At the
[4:40] Speaker 2: same time, he also said, well.
[4:44] Speaker 2: Inflation's too high and we need to see it coming
[4:48] Speaker 2: clearly back to target and coming back to target at
[4:51] Speaker 2: the required pace. So I think you can kind of
[4:55] Speaker 2: distill a couple of lessons on his reaction function from that. Firstly,
[4:59] Speaker 2: he doesn't like inflation above target. Secondly, he needs to
[5:05] Speaker 2: see inflation moving back towards target sufficiently clearly and sufficiently rapidly. Otherwise,
[5:12] Speaker 2: as he said himself, the Fed has work to do.
[5:16] Speaker 2: He didn't quite say it, but I think the markets
[5:18] Speaker 2: have interpreted work to do as rate hikes.
[5:23] Speaker 6: And we're certainly seeing that two-year yield up eight basis
[5:26] Speaker 6: points to 4.31%. Tom, thanks so much for joining us.
[5:30] Speaker 6: Really appreciate getting a couple of minutes of your time.
[5:32] Speaker 6: Tom Orlik, he's the chief economist for Bloomberg Economics. He's
[5:35] Speaker 6: based down there in Washington, D.C. Let's head back out
[5:38] Speaker 6: to jackson hole but for a dry jackson hole that's
[5:42] Speaker 6: because tom keen has found shelter he's in from the
[5:46] Speaker 6: elements and he joins us right now tom keen co-host
[5:49] Speaker 6: of bloomberg surveillance tom i'm glad you guys found some
[5:52] Speaker 6: dry ground here i'd love to get your thoughts here
[5:55] Speaker 6: on what was an eventful morning for you guys out
[5:58] Speaker 6: there in jackson hole.
[6:00] Speaker 3: Eventful morning.
[6:01] Speaker 9: I think we've covered it a lot, but what really
[6:03] Speaker 9: matters now, Paul, is the opinion of Wall Street. I'm
[6:06] Speaker 9: reading some of the research notes coming out right now.
[6:09] Speaker 9: Pretty much the same tone, which is this is a
[6:12] Speaker 9: more restrictive Kevin Warsh as chairman. not throwing a bone,
[6:16] Speaker 9: but clearly tilting towards the obvious length of the inflation
[6:22] Speaker 9: trend that we've seen. I'll let the markets decide what
[6:25] Speaker 9: the betting odds are on this meeting or the next
[6:28] Speaker 9: meeting or that. But the clarity here is surely homage
[6:34] Speaker 9: to a more restrictive Fed.
[6:36] Speaker 3: I didn't hear much dovish there this morning.
[6:40] Speaker 7: Tom, quick question about the pricing in of a September
[6:43] Speaker 7: rate hike. So can you talk to me a little
[6:45] Speaker 7: bit about what it would require for that rate hike
[6:49] Speaker 7: to happen or the chances of that rate hike to
[6:51] Speaker 7: go up?
[6:54] Speaker 9: Yeah, this is a really, really important question is if
[6:56] Speaker 9: we've got the betting, the parlor game of what the
[6:59] Speaker 9: Fed is going to do, what's the data that's going
[7:01] Speaker 9: to matter?
[7:01] Speaker 3: There's no question the data... is inflation data.
[7:06] Speaker 9: We had a jobs redo, if you will, today that
[7:09] Speaker 9: didn't even make the headlines.
[7:11] Speaker 3: It was pretty much a non-event.
[7:13] Speaker 9: But clearly there's a tone there of a fully employed America,
[7:17] Speaker 9: which so many of our listeners and viewers would aggressively
[7:20] Speaker 9: disagree with. I had a kid last night point blank
[7:24] Speaker 9: tell me how difficult it is for recent college graduates
[7:27] Speaker 9: to get jobs. So they're going to look at the
[7:30] Speaker 9: inflation data here to confirm an excuse to stay where they.
[7:35] Speaker 3: Are or maybe even to raise rates.
[7:38] Speaker 9: We certainly heard from many, including the president of the
[7:41] Speaker 9: Cleveland Fed, raise them right now.
[7:45] Speaker 6: Tom, one of the, I think, objectives a lot of
[7:48] Speaker 6: folks hoped that Mr. Warsh would achieve with the speech
[7:51] Speaker 6: is to maybe regain a little bit of the credibility
[7:54] Speaker 6: that he may have lost in some people's minds from
[7:57] Speaker 6: his initial communications with the market. From the folks you're
[8:01] Speaker 6: chatting with out there, do you think he did regain
[8:04] Speaker 6: some of the credibility that perhaps may have been lost? Yes.
[8:08] Speaker 4: Yes.
[8:10] Speaker 9: A good question because it was so dire that he
[8:13] Speaker 9: had nowhere to go but to turn it around. And Paul,
[8:16] Speaker 9: I'll give him immense credit for that. He clearly turned
[8:19] Speaker 9: it around, as Tracy Alloway said, with a record length
[8:23] Speaker 9: of speech here at Jackson Hole. It went on maybe nine,
[8:26] Speaker 9: ten paragraphs more than what I expected. So yes, I
[8:31] Speaker 9: think he improved his credibility, but I did not hear much, Paul,
[8:36] Speaker 9: of process. I didn't hear much about the mechanical nature
[8:42] Speaker 9: of how he wants to take less visibility, less chit-chat,
[8:48] Speaker 9: a quieter Fed, and then what is that process to
[8:51] Speaker 9: get to a decision?
[8:53] Speaker 3: I didn't hear much on that.
[8:54] Speaker 6: And Tom, I guess we didn't hear much on the
[8:57] Speaker 6: various committees, working groups he set up to look at
[9:00] Speaker 6: various working aspects of the Fed.
[9:02] Speaker 8: So that's something I guess we'll have to wait for.
[9:05] Speaker 9: His team was listening to you yesterday, Paul. There was
[9:08] Speaker 9: a dreaded task force that came up. I think I
[9:11] Speaker 9: can state nobody out here is offended that they're not
[9:14] Speaker 9: on a task force. I'm not sure what task force
[9:17] Speaker 9: will do. Of course, you know, Paul, we do have
[9:19] Speaker 9: the surveillance task force led by Alexis Christophorus, which keeps
[9:24] Speaker 9: us on the straight and narrow.
[9:26] Speaker 8: Stay with us.
[9:26] Speaker 6: More from Bloomberg Intelligence coming up after this.
[9:33] Speaker 5: You're listening to the Bloomberg Intelligence Podcast.
[9:36] Speaker 1: Catch us live weekdays at 10 a.m.
[9:37] Speaker 5: Eastern on Apple CarPlay and Android Auto with the Bloomberg
[9:41] Speaker 5: Business App. Listen on demand wherever you get your podcasts
[9:44] Speaker 5: or watch us live on YouTube.
[9:47] Speaker 1: Let's get right to it.
[9:48] Speaker 3: It's Friday.
[9:49] Speaker 8: We do munis like nobody else.
[9:51] Speaker 6: Nick Carollo, municipal finance reporter for Bloomberg News, joins us here. Nick,
[9:55] Speaker 6: thanks so much for joining us here in studio. How's
[9:58] Speaker 6: the muni bond market doing?
[10:00] Speaker 2: This year?
[10:01] Speaker 8: It's doing OK.
[10:03] Speaker 4: Recently, we've been paying pretty close attention to the high
[10:05] Speaker 4: yield market. This is where you're kind of riskier muni
[10:09] Speaker 4: deals or deals that are not, you know, they're based
[10:12] Speaker 4: off of some kind of other form of revenue, not
[10:14] Speaker 4: taxing revenue. And there was a big deal earlier this
[10:18] Speaker 4: month for a mental health provider called QCF, about $ 600
[10:23] Speaker 4: million that bankers tried to bring to the market. It
[10:25] Speaker 4: was unsuccessful. They turned around and offered more yield. It
[10:28] Speaker 4: still was not successful. And this was kind of surprising
[10:32] Speaker 4: to us because there's just not a lot of really
[10:34] Speaker 4: big high-yield deals out in the market right now.
[10:37] Speaker 8: There's a lot of appetite for high-yield paper.
[10:40] Speaker 4: Generally, investors told us that this is something you kind
[10:43] Speaker 4: of would have expected to price and kind of a
[10:46] Speaker 4: a frothier market, and it didn't. So we wanted to
[10:49] Speaker 4: write a story kind of about what high yield is
[10:51] Speaker 4: looking like right now. And it seems like investors are
[10:53] Speaker 4: kind of surprisingly being a bit discerning.
[10:55] Speaker 7: Do you think that this investor caution is a warning
[10:58] Speaker 7: for high yield media bonds in general, or more of
[11:01] Speaker 7: a sign of like a healthier market? People are being
[11:03] Speaker 7: more judicious about their bonds.
[11:05] Speaker 8: Definitely the latter.
[11:06] Speaker 4: I mean, everyone that we talked to basically said that
[11:09] Speaker 4: there's been cycles in the past where their appetite is
[11:12] Speaker 4: just so aggressive that there's deals that are coming to
[11:15] Speaker 4: market that, you know, really went on to default like two,
[11:18] Speaker 4: three years down the road.
[11:20] Speaker 8: Dirt deals, special projects. Most people viewed this kind of
[11:25] Speaker 8: as a sign of health in the market and.
[11:27] Speaker 4: That it's not to say that all high yield deals
[11:29] Speaker 4: are struggling, but, you know, you really have to have
[11:32] Speaker 4: the kind of yield or the interest rate to back
[11:36] Speaker 4: up the financials that your deal has.
[11:39] Speaker 6: Brightline, this is the private railroad company, right? They've got
[11:44] Speaker 6: a railroad line in Florida.
[11:46] Speaker 8: Exactly.
[11:47] Speaker 6: What's going on there?
[11:48] Speaker 4: Brightline is kind of one of the trouble children in
[11:51] Speaker 4: the market. It is one of the most important kind
[11:54] Speaker 4: of marquee high-yield deals in munis. And there has just been, uh,
[11:58] Speaker 4: recently a development where Brightline reached an agreement with an
[12:02] Speaker 4: insurer to provide financing, um, in the event that it
[12:06] Speaker 4: were to enter restructuring. So that's not to say that
[12:09] Speaker 4: that's necessarily going to happen, but investors generally see that
[12:12] Speaker 4: as kind of a potential sign of what's to come. And, um,
[12:17] Speaker 4: people are just watching this really closely because Brightline has
[12:19] Speaker 4: over $ 5 billion of debt outstanding. It's a mixture of
[12:22] Speaker 4: corporate and muni bonds and, um, They've been kind of
[12:27] Speaker 4: perpetually struggling. And if they were to restructure, it would
[12:30] Speaker 4: be one of the biggest community restructurings of all time
[12:32] Speaker 4: up there with Detroit or Puerto Rico.
[12:35] Speaker 8: Really?
[12:36] Speaker 6: I mean, it just shows you yet again, like we
[12:38] Speaker 6: needed any more evidence. We don't do the train thing
[12:41] Speaker 6: in this country very well. I mean, I'm on the
[12:44] Speaker 6: train every day for 40 years because I'm New Jersey transit,
[12:46] Speaker 6: but we are by far the minority, man. Nobody uses
[12:49] Speaker 6: the train or even thinks about it. So if you're
[12:51] Speaker 6: in Florida or California.
[12:53] Speaker 8: They're like, no, I'm just driving.
[12:55] Speaker 4: It's a shame. I mean, people in this country love
[12:57] Speaker 4: their cars. Brightline connects Orlando to Miami and I think the,
[13:01] Speaker 4: you know, the ridership numbers have kind of gone up
[13:04] Speaker 4: and down. Um, But yeah, I think creating that kind
[13:07] Speaker 4: of cultural shift is tough, getting people to abandon their
[13:10] Speaker 4: cars and take a train somewhere.
[13:12] Speaker 8: But I would have loved to see it.
[13:14] Speaker 7: When I worked in investment banking at Morgan Stanley and
[13:16] Speaker 7: I was on the Muniz team, there was so much
[13:18] Speaker 7: excitement around Brightline. Because it was right after the pandemic
[13:21] Speaker 7: and there was this sort of flight down to Florida
[13:23] Speaker 7: and people thought, okay, this is the future that we're
[13:26] Speaker 7: going to use this Brightline. It's going to reinvigorate Florida's economy.
[13:30] Speaker 7: So this is so interesting, like how this sort of
[13:32] Speaker 7: reversal of fortune has really taken place. What bearings do
[13:36] Speaker 7: you see this having on the bond market generally, generally,
[13:39] Speaker 7: as it pertains to projects like this, bringing transportation, replace
[13:43] Speaker 7: it to places that don't necessarily, or don't historically use it.
[13:47] Speaker 8: Walk me through that.
[13:48] Speaker 4: Yeah, well, I actually kind of relate to what we
[13:50] Speaker 4: were just talking about. So the, the big investors in
[13:52] Speaker 4: Brightline are firms like Nuveen, Invesco, First Eagle, These are
[13:57] Speaker 4: kind of your principal risk takers in the municipal bond market.
[14:01] Speaker 4: And right now, how that Brightline deal is going to unfold,
[14:06] Speaker 4: what the losses are going to look like for those
[14:07] Speaker 4: investors is.
[14:08] Speaker 8: Still really unclear.
[14:09] Speaker 4: And so we were wondering, is this having some bearing
[14:12] Speaker 4: on the ability of other deals to get done if
[14:15] Speaker 4: that money is tied up in Brightline? So I spoke
[14:17] Speaker 4: to John Miller, who is chief investment officer for munis
[14:21] Speaker 4: at First Eagle, kind of a star high yield muni
[14:23] Speaker 4: trader and one of the big investors in Brightline. And
[14:26] Speaker 4: he did concede that it's possible that because of Brightline,
[14:29] Speaker 4: we're seeing inflows into high yield munis a bit depressed
[14:32] Speaker 4: this year. But on the other hand, that doesn't necessarily
[14:35] Speaker 4: mean that like all these little tiny charter schools, these
[14:38] Speaker 4: little tiny senior living facilities that are trying to come
[14:40] Speaker 4: to the market, that they would have just been taken up.
[14:43] Speaker 8: No problem.
[14:44] Speaker 5: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
[14:49] Speaker 5: and anywhere else you get your podcasts.
[14:51] Speaker 1: Listen live each weekday, 10 a.m.
[14:54] Speaker 5: To noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and
[14:59] Speaker 5: the Bloomberg Business app. You can also watch us live
[15:02] Speaker 5: every weekday on YouTube and always on the Bloomberg Terminal.

Shows are listed from Apple Podcasts' charts and directory, and Podcast Index where it is used. Every show and episode belongs to its publisher and plays from the publisher's own feed; this site hosts none of them.