Next Week Outlook: Warsh's Jackson Hole Debut and US Inflation Test Weigh on Dollar

The US dollar index is currently trading near 98.83, with choppy movements this week after dipping to the 98.50 area intraday before recovering. Market focus has shifted to next week's Jackson Hole global central bank symposium, where Fed Chair Warsh's debut appearance is a key variable influencing the dollar's near-term direction.

**Warsh's Debut: Market Expectations Beyond Promises**

Warsh will speak at the Jackson Hole Economic Policy Symposium on August 28, marking his most closely watched public appearance since taking over as Fed Chair in May. According to reports, Warsh aims to use this opportunity to define the "major issues" facing the Fed, including inflation targets, productivity, and global economic shocks. However, with inflation having exceeded the 2% target for five consecutive years, his deliberate avoidance of forward guidance has already unsettled markets. Former Philadelphia Fed President Patrick Harker and other professionals note that if Warsh's speech remains limited to vague commitments without substantive details on how to bring inflation steadily back to 2% and the specific rate path, it would deeply disappoint markets.

**Inflation Test and Policy Expectation Game**

Latest July economic data showing cooling inflation and slowing job growth have significantly reduced market expectations for a September rate hike. The current federal funds rate target range stands at 3.50% to 3.75%, but Warsh has yet to specify the economic scenarios that would trigger rate adjustments. Market analysts believe the key to this speech is not simply categorizing it as "hawkish" or "dovish," but whether Warsh can demonstrate a reaction mechanism that brings long-term rates back under policy control. If his communication fails, it could lead to long-term rates rising independently while the dollar fails to strengthen, creating a "bearish steepening" scenario that is most unfavorable for risk assets.

**Historical Volatility Warning and Dollar Outlook**

The Jackson Hole symposium has historically been capable of instantly shifting market expectations. In 2022, former Chair Powell emphasized in his speech that fighting inflation would bring "pain," and all three major US stock indices fell more than 3% that day. Warsh's remarks this time face a similar test: if he can restore market confidence in controlling inflation through signals of a modest preemptive rate hike, and long-term rates remain stable, markets may perceive limited tightening, and the dollar could maintain a relatively moderate trajectory. Conversely, if he releases vague signals of holding steady amid stubborn inflation, it could undermine monetary policy credibility and amplify volatility in both the dollar and rate markets.