August 28, 2026
Federal Reserve Chair Kevin Warsh delivered his first Jackson Hole address this morning, placing inflation firmly at the center of monetary policy without committing to specific action at the September meeting. He established a high bar for further easing, emphasizing that the Committee needs clear and sustained evidence that underlying inflation is moving toward its 2 percent objective at a sufficient pace, otherwise additional policy work remains necessary. He characterized financial conditions as accommodative rather than restrictive and the labor market as consistent with full employment, two assessments that provide limited justification for near term monetary relief. He also advocated for a quieter Federal Reserve that relies less on forward guidance and more on economic data.
This week’s economic data reinforced the Federal Reserve’s focus on inflation and the challenge of further progress toward the 2% objective. The July Personal Consumption Expenditures (PCE) price index rose 0.2% for the month and 3.7% year over year, a tenth above consensus on both measures, while core PCE matched expectations at 0.2% and 3.3%. Growth remained constructive, as the second estimate of second quarter gross domestic product left annualized growth at 1.5% and lifted consumer spending to 3.4% from 3.2%. Surveys were softer in August; the Conference Board Consumer Confidence Index fell to 89.4 from 90.2 on concerns about inflation and labor market expectations, while the Chicago Business Barometer declined to 47.1 from 57.6. Our team continues to view the economy as sound, with slow progress on core inflation, the more relevant constraint on policy.
The bond market responded with a flatter yield curve as the two-year Treasury yield rose approximately 10 basis points to 4.34%, while the ten year eased 2 basis points to 4.72%, narrowing the spread to 38 basis points from 50 last Friday. Equity markets moved higher on artificial intelligence (AI) earnings, led by Nvidia, which reported revenue of $96.2 billion, more than double the prior year, and guided to approximately $108 billion for the current quarter with demand exceeding supply. Its shares rose 8.7% Thursday and lifted broader indices, leaving the S&P 500 slightly higher on the week near 7,725. West Texas Intermediate crude declined to near $83 per barrel on expectations of additional supply, while gold fell to $4,455 per ounce as of this writing. Lower energy prices help at the margin but do not change the core inflation trend.
The Chandler team continues to expect the FOMC to hold the federal funds rate in its current 3.50% to 3.75% target range through the remainder of 2026. Only a clear turn in the economic data or a material change in Federal Reserve guidance would change that expectation. We expect attention next week to turn to the August employment report on Friday, September 4, the last major labor release before the FOMC meets September 15-16. We continue to manage portfolios with an emphasis on high credit quality, ample liquidity, and disciplined management of duration and credit risk.
Next Week: S&P Global US PMI Manufacturing, S&P Global US PMI Services, ISM Manufacturing, JOLTS Job Openings, Factory Orders, Durable Goods, ADP Employment Change, ISM Services Index, and US Employment Report.
Written by Jayson Schmitt, CFA, Co-Chief Investment Officer