A New Chair’s First Time at the Podium

Kevin Warsh became the 17th Chair of the Federal Reserve on May 22, succeeding Jerome Powell. He has run two policy meetings since, holding interest rates steady at 3.50% to 3.75% both times. On Friday he gives his first Jackson Hole keynote.

That matters because a first keynote is where a new Chair tends to lay out how he thinks, rather than just what the committee decided. Markets have not yet had a set-piece speech from Warsh explaining his own framework. Friday is it.

What Is Jackson Hole?

It is an annual economics conference, hosted by the Federal Reserve Bank of Kansas City at a lodge in Jackson Hole, Wyoming. Roughly 120 people attend: central bank governors from around the world, finance officials, academic economists, and a small press contingent, drawn from more than 70 countries. This year it runs August 27 to 29.

The Kansas City Fed started it in 1978 as a conference about agricultural economics. In 1982 the organizers wanted a bigger name on the program and set out to attract Chair Paul Volcker. Volcker was a keen fly fisherman, and the best fly fishing in the Kansas City Fed’s district happened to be in Jackson Hole. The conference moved, Volcker came, and a farm-economics workshop grew into the most closely watched three days on the central-banking calendar.

What Actually Happens There?

Academics present research papers and the officials in the room debate them, across three days organized around a single theme. This year’s is financial innovation and what it means for payments and policy. The papers are published, the panels are on the record, and none of it is where the news comes from.

The news comes from the Fed Chair’s keynote, traditionally Friday morning. This year Warsh speaks at 10:00am ET, and the Kansas City Fed livestreams it and posts the text as he begins. Everything else on the agenda is a conference. The keynote is the event.

There is also a quirk worth knowing: the full agenda is not published until the evening before the keynote, so nobody outside the building knows the running order until the last minute.

Why Is It Important?

Compare it to a normal Fed meeting. Eight times a year the Fed announces a rate decision with a short statement, and that statement is negotiated word by word among nineteen officials who have to live with it. The decision itself is usually no surprise, because futures markets have priced it for weeks.

A Jackson Hole keynote has no vote behind it and no committee language to defend. The audience is academic, so the expectation is that the Chair talks about how he reads the economy rather than about the next quarter-point. And he speaks uninterrupted for thirty or forty minutes, choosing exactly what to address. It is the closest thing markets get to hearing a Fed Chair think out loud.

That has produced real moves. Powell’s 2022 keynote, warning that beating inflation would “bring some pain to households and businesses,” took 3.37% off the S&P 500 in a single session. In 2024 he opened with “the time has come for policy to adjust,” stocks rose 1.15%, and the Fed cut rates the following month.

Why This Year’s Is Drawing More Attention Than Usual

On August 19 the Treasury Department announced it would double the size of its buybacks of long-dated government bonds, an operation meant to improve trading conditions at the far end of the bond market. Yields fell on the news.

The significance for this week is less about the mechanics than about what it signaled. Policymakers stepped visibly into the market to try to help it. Once one arm of the government has done that, attention turns to the other, and Jackson Hole is the next scheduled moment anyone hears from the Fed. The market has always treated this speech as a potential event. That announcement sharpened it.

The underlying problem is what the chart shows. The 30-year Treasury yield closed at 5.31% on August 17, its highest since 2007. That yield is the interest rate the federal government pays to borrow for thirty years, so a higher number means every new long-dated bond it issues costs more to service. It is also the reference point that mortgage rates and long-term corporate borrowing costs tend to follow.

Rates at that end of the curve are not set by the Fed. They are set by whoever is willing to buy thirty-year government debt, and lately those buyers have wanted more compensation. The Fed’s own interest rate is a short-term rate. Which is why a speech has become the thing to watch: the Fed cannot lower long-term borrowing costs directly, but a Chair who sounds credible about inflation can influence what lenders demand.