Fed tells investors to play the ball with two refs

Kevin Warsh is pivoting when faced with new data. The rookie Fed chair used his address at the Jackson Hole economic conference to better explain himself, after early exhortations for investors to “play the ball, not the referee” led to general bafflement. Any clarity is a step in the right direction, but this game of trying to say neither too little nor too much is too delicate when the White House is setting its own rules.

Warsh’s speech on Friday began with banter obligatory to the annual Wyoming summit, with a few jokes about hiking in the Grand Tetons with fellow monetary policy luminaries. From there, though, he descended into a detailed assessment of current economic conditions, highlighting the need to rein in still-high inflation. He again urged investors to focus on real economic data, rather than trying to guess where Fed policy is going.

Yet his observations imply the need for action. For instance, he said that, while wage growth has not been a primary cause of inflation lately, commodities are more concerning. On “broad measures” of price rises, progress back to the Fed’s mandated 2% pace has “been modest.” Credit markets, he noted, show little sign of “policy restraint.” Generally, that implies cause and room for interest-rate maneuver.