Weekly Update 08/28/2026: Fed Chair Warsh Commits to Bringing Inflation Down

• Dick’s Sporting Goods disappoints as Foot Locker acquisition remains a drag on results 
• ABB to supply world’s first distributed control system for Kawasaki Heavy Industries liquefied hydrogen supply facility 
• Visa and Bluefin announce they have launched a new offering for in-person card payments 
• Accenture agrees to acquire McCoy, a trusted Dutch SAP transformation partner for mid-market companies 
• McKesson announced that it signed a definitive agreement to acquire Precision Medicine Group, a global provider of clinical research and biopharma commercialization services 

Domestic Economic News 

Federal Reserve Chairman Kevin Warsh warned inflation isn’t meaningfully slowing and said policymakers must be confident that it is, otherwise the central bank has “work to do.” In a sweeping speech, his first since becoming chairman of the central bank in May, Warsh reiterated that policymakers will return inflation to their 2% goal, which he said is a firm and fixed target. “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,” Warsh said at the Fed’s annual conference in Jackson Hole, Wyoming, on Friday. Warsh added that financial conditions are not currently restrictive and interest rates are the Fed’s “predominant tool” for achieving its mandate, though he stopped short of signaling he would support an interest-rate hike when Fed officials gather in September. “I stand here today committed to a discipline, not to a decision,” he said. Yields for two-year Treasuries rose by as much as nine basis points to 4.32%, while 30-year yields slipped two basis points to 5.17% — moves that signal an expectation that the Fed may need to raise short-term rates. The implied probability of a rate hike in September rose to above 50%, up from around 36% before the speech, based on federal funds futures. “Chairman Warsh gave the markets what they wanted, which was more detail on his views about the current data, particularly inflation,” said Omair Sharif, president of Inflation Insights LLC. “Of course he did not tip his hand as to any future policy actions. In that sense, this seems like a win-win for Warsh and the markets.” Warsh went on to say that, with inflation running above 2%, the Fed’s predominant focus was now on prices. And he made clear that recent data was not entirely encouraging. “While this summer’s PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved,” Warsh said. “Market prices show confidence that we will deliver price stability. And I can assure you, they’re right.” The Fed is due to receive consumer price data for August on Sept. 11, a report that could prove decisive at their next meeting on Sept. 15-16. Richard Clarida, a former Fed vice chair, told Bloomberg Television that every Fed meeting is now “live,” meaning a rate move is possible. If Fed officials don’t see improvement in inflation, he added, “They’re prepared to hike.”

 In US domestic economic news, US consumer confidence fell in August to the lowest level since the start of the year on a deteriorating outlook for business conditions and the labor market. The Conference Board’s gauge of confidence decreased 0.8 points to 89.4 after a downward revision to the prior month, data released Tuesday showed. A measure of expectations for the next six months fell to the lowest level since January, even as an indicator of present conditions rose to a four-month high. The report suggests high gasoline prices and broader cost-of-living pressures alongside a slowdown in hiring continued to weigh on American households this month. Recent data showed US retail sales fell in July by the most in more than a year as consumers pulled back after strong growth in the first half of 2026. The survey period for the report was August 3-16, a span that saw average pump prices hover above $4 a gallon as renewed hostilities in the US-Iran conflict sent oil prices higher. The US on Monday announced plans to increase economic pressure on Tehran, a move that could keep fuel costs elevated if supply concerns persist. 

The Conference Board survey showed that perceptions of the current state of the job market improved in August. The share of consumers who said jobs were plentiful rose, while the share saying jobs were hard to get fell. The difference between the two — a metric closely followed by economists — matched the widest reading this year. Looking ahead, however, consumers were more negative about future job and income prospects. They also were less optimistic about future business conditions, though the share of respondents saying they intend to take a vacation within the next six months rose to the highest level since January. “Anticipated spending on services pared back in August after a pop in most discretionary activities last month, as lower gas prices and the summer’s World Cup likely boosted consumer’s desire to spend in July,” the report said. “Despite this, consumers still planned to spend more overall on services over the next six months.” A separate measure of consumer sentiment by the University of Michigan fell in August for the first time in three months as households worried about worsening business conditions and rising inflation. 

US new-home sales declined in July to a six-month low, indicating higher mortgage rates are curbing demand even as builders trim prices and offer incentives. Contract signings on new single-family homes decreased 10.5% last month to a 607,000 annual rate, according to government figures released Tuesday. Economists surveyed by Bloomberg expected a 620,000 annualized sales pace, based on the median estimate. The median sales price fell 0.9% from a year earlier to $393,800. Sales have fallen in three of the last four months, adding to evidence of a housing market burdened by elevated finance costs and prices. While builders have had some success bolstering demand with free upgrades, mortgage rate buydowns and price reductions, the entry-level market remains affordability-constrained. DR Horton Inc., known for its affordable starter homes, said last month that it expects to sell fewer houses than previously expected. At the same time, Toll Brothers Inc. last week reported an increase in signed contracts in the three months through July. The luxury homebuilder said its affluent customers are less sensitive to moves in mortgage rates and able to use proceeds from the sale of a previous home to trade up. The government’s report showed that the supply of new homes for sale decreased 1.6% in July from a year ago to 488,000, representing 9.6 months of inventory at the current sales rate. Builders have limited the pace of new construction as they sell off a bloated inventory of properties on the market. Sales in the South, the nation’s biggest homebuying region, slumped 13% in July to an annualized 383,000. Sales in the Midwest dropped nearly 43%, the lowest level since 2012. Contract signings rose in the West and Northeast. New-home sales are seen as a more timely measurement than purchases of existing homes, which are calculated when transactions close. However, the data are volatile on a monthly basis. The government report showed 90% confidence that the change in new-home sales ranged from a 24.5% decline to a 3.5% gain.

A closely watched US price gauge rose in line with expectations in July and consumer spending stalled, giving the Federal Reserve some room to hold interest rates steady in the near term. The so-called core personal consumption expenditures price index, which excludes food and energy items, advanced 0.2% from a month earlier, and 3.3% from a year earlier. Inflation-adjusted consumer spending was flat last month following strong increases in May and June. The numbers add to a string of reports suggesting the economy cooled in July after robust spending earlier in the summer. Many Fed officials want to wait for more signs that inflation pressures from the Iran war are receding, and the data could bolster the case for holding interest rates unchanged at their next meeting in September. The latest data showed prices overall in the Fed’s preferred gauge were up 3.7% from a year earlier, still well above the central bank’s 2% goal. “Even though the July reading is muted, the only issue for the Fed is inflation is above their target,” said Richard Moody, the chief economist at Regions Financial Corp. “And even if it doesn’t look like it’s set to accelerate further, neither does it look set to fall back to their target.” US Treasury yields and the dollar rose following the release, while the S&P 500 index opened lower. A closely watched metric of services inflation that excludes energy and housing was up 0.3%. It was boosted by a 5.6% increase in the price of portfolio management and investment advice services, the biggest advance in a year. Starting next month, the BEA will make changes to how prices are measured for certain categories — including legal services, computer software and investment advice — that many economists expect will mean a lower PCE reading.

 The US merchandise-trade deficit widened in July to the largest since early last year on a multi-decade surge in inbound shipments of capital equipment. The shortfall in goods trade grew 17.2% from the prior month to $118.8 billion, the largest since March 2025, Commerce Department data showed Thursday. The gap was wider than all estimates in a Bloomberg survey of economists. The figures aren’t adjusted for inflation. Merchandise imports climbed 3.7%. The advance was fueled by the largest increase in capital goods — a category that includes computers and accessories, semiconductors and telecommunications equipment — since 1993. US exports of goods fell 2.9%. The trade deficit has fluctuated in recent months as the Iran war helped boost global demand for US petroleum products and American firms stockpiled goods and materials to mitigate supply-chain disruptions. Companies are adjusting to changing tariff rates at the same time imports of equipment linked with the artificial intelligence remain healthy. Thursday’s figures showed both inbound and outbound shipments of industrial supplies, where crude oil and petroleum products are counted, declined in July. The category also includes nonmonetary gold, which has helped fuel swings over the past year. Imports of consumer goods rose only slightly, while other categories showed a decline in inbound shipments. “While the wider than expected trade deficit will weigh on Q3 GDP growth, it reflects the strong demand for AI-products, not US economic weakness,” Nationwide Chief Economist Kathy Bostjancic said in a note. 

On the labor market front, weekly initial jobless claims fell 4000 to 203,000 in the week ending August. That compared with the median Bloomberg estimate for 208,000. The Labor Department data showed the four week moving average was 205,500 while continuing claims fell 18,000 to 1.778 million. Despite continued concerns about the US labor market, the current data supports the notion that the employment picture remains healthy.

Interest Rate Insight and the Fed

Federal Reserve Bank of Boston President Susan Collins said she supported holding interest steady for now, but conditioned that on seeing more progress in bringing inflation back toward the central bank’s 2% target. “Maintaining the current federal funds rate target range will require continued evidence that inflation is indeed coming down,” Collins wrote in an essay published Tuesday by the Boston Fed. “Should evidence of sustained inflation progress not materialize, I believe it will be appropriate to tighten policy soon.” Fed policymakers are next scheduled to meet Sept. 15-16 in Washington. The Boston Fed chief said recent inflation prints, showing subdued underlying price pressures, were “mildly encouraging” but added monthly readings can be volatile. “It remains to be seen whether the recent improvements will be sustained.” Fed officials left interest rates unchanged in July. Three policymakers, however, favored a quarter-point hike, reflecting growing division over how to react to persistently high inflation. Two other non-voters have said they also supported an increase. Collins, a non-voter, said she backed the rate hold in July. Collins said restrictive interest rates together with the rise in longer-term yields, should also mitigate some of the inflationary pressures generated by strong consumption from households and businesses. She added that she expects the pass-through from previous tariffs has largely played out and the impact on inflation from higher oil prices should begin to wane. “Less benign scenarios are also quite plausible,” Collins warned. “In particular, there are upside risks to inflation from both additional adverse supply shocks, and a stronger-than-expected pace of economic activity. With regards to the latter, I’ll note that the AI build-out appears to be putting upward pressure on core goods inflation.” Collins said the labor market remained in an “unusual balance,” and one that was not without risks.

Impactful International News

Germany’s economy grew quicker than initially thought in the second quarter, while a top gauge of the business outlook hit its highest level since before the Iran war, further evidence that a long-awaited revival is under way. Output rose 0.3% between April and June, up from a preliminary estimate showing 0.2% expansion, thanks to a strong performance by trade. The ifo expectations index, meanwhile, jumped more than any analyst surveyed by Bloomberg anticipated. “The German economy is recovering,” ifo President Clemens Fuest said in a statement. “Companies were more satisfied with their current situation, and they revised their expectations significantly upward.” After years of lethargy, Germany’s economy finally seems to be healing, recording three straight quarters of expansion for the first time since the end of the pandemic despite the faster inflation and higher interest rates triggered by the Iran war. The upturn, while still facing challenges including a drought affecting crucial transport waterways, comes before three state elections that will be a test of Chancellor Friedrich Merz’s performance since he took office last year. While Merz has spearheaded a military and infrastructure spending drive that’s juicing growth, and is also pushing a package of economic reforms, the parties in his government remain under pressure from the far-right Alternative for Germany. The AfD has been capitalizing on Germany’s industrial struggles, with another such example coming Tuesday as Volkswagen AG labor representatives warned that planned job cuts could eventually affect as many as 140,000 positions. But data of late have generated increasing optimism. Ifo’s expectations gauge reached 89.1 and bumper outlays on defense have helped push manufacturing activity to its highest level in more than four years. The benchmark DAX index climbed to a record in August. “While commentators and politicians in Germany are still whining that the German economy is stagnating and no escape from years of recession is in sight, current data tells a slightly different story,” said Sebastian Dullien, scientific director at the IMK institute. Analysts surveyed recently by Bloomberg raised their growth forecasts for this year to 0.8% from 0.6%, a pace they see accelerating to 1.2% by 2028. Economists at KfW, Germany’s state-owned development bank, lifted their own projection for 2026 to 1.1% from 0.7% after Tuesday’s GDP report. They cautioned, however, that low water levels in the Rhine river will halt momentum in the third quarter. “We’re seeing light at the end of the tunnel,” said Dirk Schumacher, KfW’s chief economist. “There’s justified hope that industrial production will pick up noticeably in the future — not only, but also, because of fiscal stimulus.”

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