In saying nothing — or anyway very little, and nothing of real substance — about Fed policy while chatting with Kristalina Georgieva at the IMF meetings in Bangkok, Kevin Warsh quashed the notion this week’s US inflation data put an October rate hike back on the table.

Warsh would say his coy demeanor in Thailand was merely a manifestation of a long-standing antipathy to forward guidance, but let’s not kid ourselves: He knew damn well that by not alluding to an increased sense of urgency following back-to-back escalatory price growth prints was functionally the same as confirming no change in Fed funds on October 28.

In public remarks this month, Warsh’s colleagues on the FOMC, including his deputy and other board members, all uniformly tipped a disinclination to raise rates for a second consecutive meeting. Market-implied odds for a hike at the October gathering, which at the hawkish extremes were nearly three in four, were less than 25% headed into this week’s inflation readouts from the BLS.

Those readouts were, to employ a polite, academic cadence, discomfiting. The CPI release overshot on nearly every line, including the core measure and the “supercore” metrics that track core services price growth excluding housing costs. The following day’s PPI report was even worse — a “wholesale effing disaster,” as I put it.

Recall the test Warsh set out in Jackson Hole. These are his words, verbatim:

Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That’s our job, our mandate and our charge to keep.

This week’s inflation series from the BLS plainly didn’t meet that standard. In fact, it suggests the opposite. Underlying inflation’s moving away from the Fed’s objective, and “at speed.”

At the September FOMC meeting, Warsh admitted things weren’t going well. He cited his own Jackson Hole rule to explain that month’s rate hike. Information received since then suggests the inflation situation’s worsened further. And that US households are feeling the heat.

The figure above’s simple: It plots core PPI with core CPI. If the latter catches up, Warsh is going to get caught behind the curve, just like his predecessor.

Near-term inflation expectations in the latest installment of the NY Fed’s monthly consumer poll were the highest since May of 2023 and the current conditions index in the preliminary read on University of Michigan sentiment for this month hit a record low in data going back more than half a century.

Although the September jobs report was disappointing, there’s no evidence to suggest downside risks to the US labor market have intensified such that the Fed should prioritize the employment side of the dual mandate.

As the figure below shows (and as previewed here) the four-week average for initial US jobless claims printed below 200,000 for a second consecutive week. The same phenomenon occurred in August and also in 2022.

Prior to 2022, the last time the four-week average of initial filers was below 200,000 for consecutive weeks was 1969. So, jobless claims have just done something twice in two months that the series had previously only done twice in 55 years. (Read that again.)

At the same time, the latest read on ADP’s high-frequency private hiring series suggested that while private payrolls growth slowed late last month, employers were still hiring nearly 25,000 people per week in the four weeks to September 26.

In his chat with Georgieva on Friday, Warsh reiterated that the Fed will “deliver price stability.” “We removed a dose of accommodation about a month ago,” he reminded the audience.

Right, and while I actually agree it’s best to hold off on additional hikes until December, the problem’s the same: Between Warsh’s tough talk on inflation since taking the reins from Jerome Powell, Donald Trump’s incessant calls for lower rates and, now, a mock trial for Lisa Cook at the White House, the optics of holding rates in the face of a broad-based inflation re-acceleration are very challenging.

“I don’t prejudge meetings,” Warsh went on, in Bangkok. “I don’t believe in saying now what I might do at the meetings that we have in the balance of this year.” And yet, as noted here at the outset, Warsh ironically prejudged the October meeting by refusing to prejudge it. That was particularly evident in his assessment that since last month’s gathering, “the world has broadly conformed” to the Fed’s “expectations.” (So the Fed “expected” both consumer price growth and factory-gate inflation to print ahead of almost all economists’ forecasts this week? They might’ve told someone!)

“The lack of anything overtly hawkish left the market with the impression that an October pause is now the path of least resistance,” BMO’s US rates team said Friday, of Warsh’s remarks, adding that market pricing now has the October meeting at just 15% for a move. That’s 0% when you adjust for Warsh’s stated determination to break with the post-GFC precedent of creating something akin to certainty among STIR traders ahead of policy decisions.

“There is no doubt that additional tightening is necessary; the lingering question is the timing,” JonesTrading’s Mike O’Rourke said, ahead of Warsh’s fireside chat in Thailand. “Potential plans to reduce the number of FOMC meetings make a great deal of sense if the October meeting in election years is essentially a no-action zone.”