Fed Rate Hike Expectations Rise Following Warsh Speech; Brazilian Real Declines

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On 28 August 2026, Federal Reserve Chair Kevin Warsh used his first Jackson Hole address to emphasize that reaching the 2 percent inflation target remained the central bank's primary objective. Following his speech, market expectations for a September interest rate hike increased significantly, with FedWatch tool odds rising from 35 percent to roughly 59 percent. This shift in sentiment triggered a decline in the Brazilian Real, which weakened 0.67 percent against the dollar to close at R$5.1965, and caused a 3.2 percent drop in spot gold prices.

Consequences

If the Federal Reserve proceeds with a quarter-point rate increase during the 15-16 September meeting, it would mark the first hike under Chair Warsh's tenure. Analysts at Société Générale have already updated their forecasts to anticipate additional rate increases in December 2026 and March 2027 following the speech.

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