--- title: "[Mou Weekly] Stop guessing, this is exactly what Warsh meant to say (Week 35 of 2026 | Issue No. 285)" type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/43667260.md" description: "On Saturday, I shared the Chinese-English parallel text of Warsh's speech at Jackson Hole in the group chat and recommended reading the original. A group member replied: "How we interpret it doesn't matter; what matters is how Wall Street interprets it." This sounds smart—markets are indeed driven by pricing—but it happens to hit the bullseye of this very speech. We'll start from this quote today because the mindset behind it is exactly what Warsh dedicated an entire paragraph to criticizing. Bottom line: The most important takeaway isn't whether he's 'hawkish,' but that Warsh announced a change in the rules of the game. Understanding this..." datetime: "2026-08-30T13:35:01.000Z" locales: - [en](https://longbridge.com/en/topics/43667260.md) - [zh-CN](https://longbridge.com/zh-CN/topics/43667260.md) - [zh-HK](https://longbridge.com/zh-HK/topics/43667260.md) author: "[谋定后动](https://longbridge.com/en/profiles/2064990920919875584.md)" generator: "portal-rs" --- # [Mou Weekly] Stop guessing, this is exactly what Warsh meant to say (Week 35 of 2026 | Issue No. 285) Last Saturday, I shared the Chinese-English parallel text of Warsh's Jackson Hole speech in our group chat and recommended reading the original. One member replied: "How we interpret it doesn't matter; what matters is how Wall Street interprets it." This sounds smart—markets are indeed driven by pricing. But it ironically hit the bullseye of this very speech. We'll start from this quote because the mindset behind it is exactly what Warsh dedicated an entire paragraph to criticizing. Bottom line: The most important takeaway isn't whether he was "hawkish or dovish," but that Warsh announced a change in the rules of the game. Grasping this is far more critical than guessing whether rates will rise in September. **First, the facts: One speech, six versions** What did Warsh actually say? The core message boils down to one sentence: ***"My standard is: We must be confident that underlying inflation is moving 明确 ly and at a sufficiently rapid pace toward our objective. Otherwise, we have work to do."*** Note this is a conditional statement. The condition comes first, the conclusion follows. The phrase "work to do" was never defined as rate hikes. Yet, Chinese financial media headlines that night read: "Vows to fight inflation," "Warsh hints rates may need to be higher," and "Bearish surprise, gold plunges straight down." Even more interesting is the implied probability of a September rate hike. That night, various Chinese media outlets reported figures like: 50%, 56%, 57.4%, 57.5%, 58%, and close to 60%. Six different numbers, none specifying the timing or methodology. Same speech, same market, six different "facts." Moreover, most of these interpretations were just the same press release reposted with different logos. The claim that "major media consistently interpreted it as hawkish" was often just one article copied dozens of times. **Revisiting "how Wall Street interprets it": At least three factions, clashing** Alright, let's follow the group member's advice and look at Wall Street. I compiled the stances of major investment banks after the speech, and the result showed Wall Street itself split into three camps. **Betting on hikes:** Société Générale was the most hawkish, predicting 25bps hikes in both September and December, plus another in March next year. It was the only large bank explicitly betting on "two hikes this year." Commerce Bank judged at least one hike within the year, arguing the Fed needs to act to maintain its anti-inflation credibility. Wells Fargo Investment Institute predicted one hike this year and one next year—note the rhythm: also two hikes, but spread over two years. Nomura stated the risk of a rate hike within the year has increased. **Betting on no moves:** Goldman Sachs was the most significant counterparty. Hatzius's baseline forecast is for rates to remain unchanged through year-end, with cuts pushed to 2027. His logic: "After two months of notably soft employment and inflation data, it's hard to imagine dovish members turning hawkish." Goldman also warned that market pricing itself is too hawkish. State Street's Chief Strategist Arone was even more direct: "The market has already priced in a September hike; I'm not sure they'll get that outcome." His basis: last month's non-farm payrolls were negative, retail sales declined, and housing is weak. He believes Warsh was hedging his bets, and this speech also prepared the script for continuing the pause. **The middle ground:** Citi delayed its rate cut forecasts but didn't bet on hikes. Principal's Shah acknowledged rising risks of a September hike but still expected data improvement. Morgan Stanley predicted before the speech that Warsh would give no short-term guidance, which proved accurate afterward. Putting everyone's stances into a table makes the divergence clear at a glance: So, when you say "look at how Wall Street interprets it," which firm do you look at? Société Générale bets on two hikes, Goldman Sachs on zero, and State Street says the market is overthinking it. Wall Street's interpretation isn't an answer key to copy; it's a market currently betting against itself. **Here's the key point: The sentence ignored by all headlines** Now, let's discuss the true core of this speech. Warsh's original words: ***"We should not condone a mechanism where market participants primarily watch the Fed to decide their next trade."*** And the accompanying passage: ***"If markets rely heavily on Fed guidance, while the Fed relies on market prices, then all of us are more likely to turn a blind eye to new developments, more likely to be caught off guard when conditions reverse, and more likely to make mistakes in policy-making."*** In economic literature, this is called the "hall-of-mirrors problem." Two mirrors facing each other reflect only each other's images, and neither sees the real room. Markets price based on Fed hints, and the Fed references market prices for decisions. In the end, both sides are watching each other's faces, ignoring the economy itself. Warsh cited a stark case study: 2021. The Fed had provided ample forward guidance ("inflation is transitory," "no rate hikes in the short term"). The market believed it, and the Fed was bound by its own promises. The result? A full year delay in responding to high inflation. 65 months of high inflation, he said, "the responsibility clearly falls on the central bank." So what he's doing now is essentially unilaterally exiting this game: no forward guidance, no reaction function, no rate path, and even undermining the authority of the dot plot (a footnote specifically cites research showing market expectations stick to the dot plot, creating predictable forecast errors). He wants a "quieter Fed": You look at the data, we look at the data, stop guessing each other. **What this means for us** The rules have changed, so the gameplay must change. Four points: **First, "Fed Watch" is losing value.** For over a decade, trading on subtle changes in officials' speech wording was an effective strategy because the Fed was indeed signaling paths through wording. Now, the Chair explicitly says he won't signal. Henceforth, the "signals" extracted from each speech will have a significantly higher noise ratio. The clash among the six September hike probabilities reported by Chinese media this week is a preview of this new normal. **Second, volatility on data days will increase.** With no Fed guidance, the market must digest every data point itself, leading to sharper divergences and swings in pricing. The August CPI on September 11th has been elevated to a rarity in recent years: both Goldman Sachs and Wells Fargo have explicitly tied their September hike judgments to it. Options traders should feel the IV pricing changes on such event days directly. **Third, the value of the original text rises.** This is precisely why I recommend reading the original—it's also the formal response to the group member's quote. Before the speech, September hike pricing was 35%; one hour after, it jumped to 50%. Wall Street itself changed its stance only after reading the original. If you don't read the original, you're always an hour late, relying on clickbait secondary reports. In a market where the official source no longer feeds answers, the spread between primary and secondary information will widen further. **Fourth, don't directly translate "hawkish" as "continuous rate hikes."** This is the biggest sleight of hand in this week's Chinese 舆论场. Warsh said "otherwise we have work to do," but media read it as "start of a hiking cycle." Deleted in between were all counter-evidence: negative non-farm payrolls last month, the benchmark revision of -79k (vs. +183k expected), three votes for a hike at the July FOMC but no dissent from the Board, and the yield curve flattening that night, with the bond market using real money to say "if you really hike, the economy will break." My judgment remains unchanged: September is roughly a coin flip, about 40% chance of one hike this year, 25-30% for two hikes—not a high probability. The dot plot on September 16th will reveal the truth. **Conclusion** Back to the group chat quote: "we have to see how Wall Street interprets it." Warsh's speech this time amounted to saying in front of the world: Even the Fed doesn't want you to trade based on guessing others' interpretations. Wall Street's understanding changes hourly, Chinese media's understanding is the same press release, and the official understanding will no longer be released in advance. All that's left to grab is data and the original text. This isn't idealism; it's the only source of informational advantage under the new rules. Next week's focus: Non-farm payrolls on Sept 4, CPI on Sept 11, followed by the FOMC meeting and new dot plot on Sept 15-16. [\[For next week's outlook and specific holdings details, please visit the website\]](www.finplusplus.com) (The above is a personal summary of views and does not constitute investment advice.) ### Related Stocks - [GS.US](https://longbridge.com/en/quote/GS.US.md) - [GS-A.US](https://longbridge.com/en/quote/GS-A.US.md) - [GS-C.US](https://longbridge.com/en/quote/GS-C.US.md) - [GS-D.US](https://longbridge.com/en/quote/GS-D.US.md) - [SCGLY.US](https://longbridge.com/en/quote/SCGLY.US.md) - [STT.US](https://longbridge.com/en/quote/STT.US.md) - [STT-G.US](https://longbridge.com/en/quote/STT-G.US.md) - [MS.US](https://longbridge.com/en/quote/MS.US.md) - [BTQ.US](https://longbridge.com/en/quote/BTQ.US.md) - [MS-A.US](https://longbridge.com/en/quote/MS-A.US.md) ## Comments (2) - **Aurelius · 2026-08-31T05:59:28.000Z**: If the reaction function itself moved, every playbook for reading Fed speak is calibrated to the wrong regime now. That matters more than the hawkish label. - **Bond · 2026-08-31T03:55:02.000Z**: a rules change and a hike are not exclusive though. he can reset the framework and still deliver 25 in september. --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**