Recently, Federal Reserve Chairman Kevin Warsh delivered his first keynote speech since taking office at the Jackson Hole Global Central Bank Annual Meeting. This speech gave the market no "sweet" hint at rate cuts; instead, with the phrase "we still have work to do," it completely crushed the market's previously bet on easing.

After the speech, the probability of a rate hike in September soared from 35% to about 60%, the 2-year U.S. Treasury yield jumped over 11 basis points, gold fell more than 2% intraday, and the three major U.S. stock indices all closed lower.

But if you panic just by seeing the words "hawk the hawk," you might be missing what Washes truly wants to convey. The value of this speech goes far beyond simply "raising interest rates."

|If inflation doesn't meet targets, the door to rate hikes won't close

The core hawkish signal in Walsh's speech can be summed up in one sentence: if inflation doesn't fall quickly, the rate hike option won't be closed.

He gave a very clear framework for judgment:

The most critical sentence: "We must be confident that underlying inflation is clearly falling back toward target at a sufficiently fast pace." Otherwise, we still have work to do. "Put plainly: Don't fool me with just a few months of data. Before inflation truly comes down, rate hikes could come again at any time."

But if you look closely, Wash's "Eagle" is not the kind of tough eagle that cuts all at once. He did something very smart—refusing to give a clear timetable for rate hikes, nor to offer traditional "forward-looking guidance."

He made it clear: "Don't let the market keep an eye on the Fed for the next deal"—the Fed should not allow the market to trade by guessing the central bank's mood. "I stand here today, committed to discipline, not a specific decision." Future policies will rely entirely on follow-up data and will not rely on verbal statements to write a "script" for the market.

What does this mean? Walsh did not say that a rate hike would definitely happen in September; he only said, "If the data doesn't support it, we can't rule out raising rates." The ball was passed to the upcoming August CPI and nonfarm payroll data—inflation has eased, rate hike expectations cooled; Prices rebounded, tightening to realize the benefits.

A deeper signal from this speech is that Walsh is redefining the Fed's relationship with the market.

He took office in May and has just reached 100 days of his term, having already launched a review and reform of multiple functions of the Federal Reserve. He bluntly criticized previous chairs for relying on "forward-looking guidance," saying this has led to a "hall of mirror effect" between the central bank and the market—the market guesses the Fed, and the Fed then looks at market prices to judge the economy. Both sides look in the mirror, neither is looking at the real world.

His proposed solution is to build a "quieter, more purposeful communication" Fed. Reduce unnecessary policy noise and let the market return to the data itself.

This approach differs significantly from the approaches of previous Fed chairs. In the past, the Jackson Hole Annual Meeting was often used to indicate the direction of interest rates and signal important policy changes such as policy framework adjustments. Walsh tried to weaken the central bank's direct guidance on short-term market expectations.

| U.S. Debt Game: A "Silent Confrontation"

There was a particularly intriguing detail in this speech—Wash's entire speech did not mention Treasury Secretary Becent's recent intervention in the U.S. Treasury market.

Here's the background: since 2019, the U.S. annual fiscal deficit has exceeded 4% of GDP, and the federal debt has surpassed $40 trillion for the first time. The 30-year Treasury yield hovered at a 19-year high. The Treasury Department tried to ease market pressure by ramping up old debt buybacks, but the results were limited—after the buyback announcement, yields briefly fell but quickly rebounded.

Bescent even publicly suggested that the Fed should "consider expanding" lending instruments to overseas central banks to protect the U.S. bond market.

Walsh's silence is precisely an invisible line drawn before the red line of "monetary dominance" and "fiscal dominance." His position is clear: the Fed's monetary policy cannot be held hostage by government fiscal needs.

| Institutional Disagreement: September Rate Hike Still '50-50'

Although Wash's speech was hawkish, it was not decisive. Major institutions remain deeply divided over the Fed's next move.

On the market side, the implied probability of a September rate hike in interest rate futures surged from about 35% before the statement to around 55%-60%, but a significant proportion of traders still believe the possibility of holding steady is still possible. Former Federal Reserve Vice Chairman Blind believes that Walsh's remarks "seem to be seeking reasonable grounds for rate hikes"; CICC pointed out that if rate hikes are driven by strong economic demand, it would actually be more favorable for the market in the medium term.

Politically, Trump has been publicly pressuring for rate cuts, while Walsh's hawkish stance has clearly clashed with the White House.

Some market participants speculate that Washh might choose a "stalling tactic"—postponing rate hikes until after the November midterm elections before sending a more hawkish signal. However, it should be emphasized that this is currently just market speculation; Walsh himself has never publicly stated this.

Kingtech Perspective | Understanding the information behind hawkish signals

The delay in rate cut expectations means the window for global liquidity easing continues to move backward. Interest rate-sensitive high-valuation growth stocks (especially U.S. tech leaders) face short-term valuation compression pressure.

In A-shares, northbound funds may be temporarily cautious due to the widening China-US interest rate spread, with increased volatility in foreign heavy holdings such as computing power and semiconductor equipment. However, it should be noted that Walsh only keeps the possibility of a rate hike open, not an immediate hike—as long as inflation does not continue to rebound, this round of hawkish sentiment is more of an expectation correction than a new round of aggressive tightening.

After Walsh's speech, the US dollar index strengthened, with gold falling more than 2% intraday. In the short term, the high interest rate environment suppresses the interest-free asset gold.

However, in the medium to long term, the structural issues of the U.S. fiscal deficit continuing to expand and federal debt surpassing $40 trillion remain unresolved, and gold's safe-haven and inflation-resistant attributes remain solid. Short-term pullbacks may actually be a window for medium- to long-term positioning.