Commerzbank Says Dollar May Face Pressure if Warsh Signals New Inflation Gauge

Commerzbank said investors should watch whether Kevin Warsh, chair of the Federal Reserve, signals the possible adoption of a new inflation gauge during a Jackson Hole speech at 11 p.m. on Aug. 28.

BlockBeats reported that Commerzbank analyst Volkmar Baur said Warsh has repeatedly stressed in recent weeks that the Fed’s 2% inflation target is non-negotiable. But he has not explicitly referred to the personal consumption expenditures price index, or PCE, raising the possibility that the Fed is at least considering the use of a different inflation measure.

If Warsh signals in the speech that a new inflation gauge could be introduced, expectations for additional rate hikes could weaken. Markets could interpret that as a dovish signal, putting downward pressure on the dollar.