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Economics Weekly: Hawkish Warsh Shifts Market Focus to Data
G3: Central banks on watch. For Kevin Warsh’s Jackson Hole speech on 28 Aug, investors entered the event not quite knowing what to expect. Warsh had offered little guidance in his previous spee...
Chief Investment Office - Hong Kong4 Sep 2026
  • G3: Hawkish Warsh shifts market focus to labour market and inflation data; the ECB is likely to deliver an expected rate hike at next week’s meeting; BOJ Governor Ueda hinted at a rate hike at the September meeting
  • India: Strong start, with a robust 7.8% GDP growth reinforcing the view that its domestic demand cycle is more resilient than initially assumed despite external shocks; we have revised up our FY27 growth forecast to 7.3% y/y from 6.8% previously
  • ASEAN-6 & North Asia: ASEAN-6 will continue to benefit from trade and investment openness despite rising geoeconomic fragmentation; besides growing the intra-ASEAN pie, trade and investment links with North Asia are set to deepen further

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G3: Central banks on watch. For Kevin Warsh’s Jackson Hole speech on 28 Aug, investors entered the event not quite knowing what to expect. Warsh had offered little guidance in his previous speeches and was widely viewed to be leaning dovish. His speech sought to correct that perception. Warsh reaffirmed that the core PCE deflator remains the benchmark, expressed skepticism that inflation has cooled sufficiently, while also suggesting that financial conditions may be too loose. While stopping short of providing explicit forward guidance, this level of communication is much appreciated by the market and marks a shift from his previous stance. With Fed Chair Warsh perceived as meaningfully more hawkish, market participants are leaning heavily on upcoming labour market data and inflation data to determine how to price the next meeting. Currently, the odds of a hike are close to 64%, but we suspect these odds could move towards either extreme (closer to 0% or 100%) if the upcoming data aligns. That said, while market consensus expects NFP data to post a 55k gain in August following a 23k loss in July, the ADP employment rate came in weaker than expected at 38k in August (consensus: 47k), following an upwardly revised 46k in July. On the inflation front, consensus expects headline inflation to rebound by 0.4% m/m in August from 0.1% in July, while core inflation is expected to hold at 0.2%. The ISM manufacturing Prices Paid Index remained unchanged m/m at 71.1 in August, rather than edging down to the market consensus of 70.8. For Japan, BOJ Governor Ueda hinted at a rate hike at the 17-18 Sep meeting, citing upside price risks. BOJ’s Takata said that a 25 bps rate hike is not necessarily set in stone (i.e. an outsized 50 bps hike is possible) and that back-to-back hikes cannot be ruled out. Markets have now shifted to pricing in a small chance of a 50 bps hike in September, compared with a 90% chance of a 25 bps hike at the start of the week beginning 1 Sep. Meanwhile, Eurozone headline CPI accelerated to 3.3% y/y in August (preliminary) from 2.9% in July, as expected, driven mainly by higher energy costs as both crude oil and natural gas prices increased. This should back the ECB’s widely expected 25 bps rate hike at its 9-10 Sep meeting. Meanwhile, underlying price pressures remained modest, underscoring the limited second-round effects thus far, which could contain further rapid inflation and ECB’s aggressive tightening. Core inflation eased to 2.4% in August from 2.5% in July as services inflation decelerated to 3.0% from 3.3%.


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