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Fed Chair Kevin Warsh reaffirmed a 2% inflation target, pushing September hike odds to 57.5%. Nvidia reported $96.2B in Q2 revenue, up 106%, driving tech
Federal Reserve Chair Kevin Warsh delivered a hawkish message at Jackson Hole, stating that recent inflation prints do not show meaningful improvement and that current financial conditions are not restrictive, signaling room for further interest rate hikes. This stance came as Nvidia reported its fiscal Q2 revenue doubled, significantly boosting tech stocks and creating a split market reaction [1, 2].
| At a glance | |
|---|---|
| Fed Chair Warsh's Inflation Target | 2% [1] |
| Core PCE (12-month) | 3.7% [1] |
| Odds of September Fed Rate Hike | 57.5% (vs. 39.9% prior week) [1] |
| Nvidia Q2 Revenue | $96.2 billion (up 106% year-over-year) [1] |
| Nvidia Share Price Move | +8.74% on Thursday [1] |
Warsh, in his first Jackson Hole keynote, described the 2% inflation level as a "firm, fixed target" and dismissed recent better-than-expected prints as insufficient evidence of improving underlying trends [1]. The Core Personal Consumption Expenditure (PCE) price index, the Fed’s preferred inflation gauge, tracked at 3.7% over the past 12 months and 4.1% over the past six, both above the Fed's mandate [1]. Warsh attributed 65 months of elevated inflation to the central bank and noted that financial conditions, with credit spreads near historic lows and easy bank lending standards, are not restrictive, suggesting further rate increases are possible [1]. He also cited the 4.1% unemployment rate as consistent with full employment, removing a traditional trigger for rate cuts [1].
Following Warsh's remarks, rates markets immediately repriced, with the probability of a September Fed interest rate hike jumping to 57.5%, up from 39.9% a week prior and 24% a month ago, according to CME FedWatch [1]. The 2-year Treasury yields rose above 4.30%, and the dollar rebounded [1].
In contrast to the Fed's tightening signals, the tech sector saw significant gains driven by strong earnings reports. Nvidia Corp. reported fiscal year 2027 second-quarter revenue of $96.2 billion, a 106% increase year-over-year, surpassing the $92 billion consensus by 4.5% [1]. The company's third-quarter guidance was set at $108 billion, approximately $4 billion above Street expectations, with data center revenue continuing its upward trend [1]. Nvidia also projected 70% revenue growth for fiscal year 2028, exceeding estimates of 40% [1].
Nvidia shares closed 8.74% higher on Thursday, marking its largest single-session gain since April 2025 [1]. This performance helped lift the S&P 500 by 0.7% and the Nasdaq by 1.6%, even as other sectors declined [2]. The cybersecurity sector also saw notable gains, with CrowdStrike Holdings surging 20.5% on Thursday, its largest single-day increase ever, following a record second-quarter report [1]. Salesforce shares rallied over 20% for the week, leading the S&P 500, after an 80% earnings beat and above-expected guidance [1]. Salesforce also announced "Claudeforce," a deepened partnership with Anthropic, making Claude the default AI model across its products, and recorded a $2.6 billion mark-to-market gain on its Anthropic stake [1].
The week's market activity highlighted a divergence between a hawkish Federal Reserve intent on controlling inflation and a booming tech sector fueled by strong AI-driven earnings, creating a complex environment for investors [1, 2].
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AI-assisted synthesis by the TrendWatcher Editorial Desk · sourced from 3 outlets · Sep 1, 2026 · How we report
As of September 2026, the federal funds rate is 3.75 percent. This follows an easing cycle that saw the rate fall from a range of 5.25-5.50 percent.
The Federal Reserve influences Fed Rates by adjusting the interest on reserve balances (IORB), the discount rate, and conducting open market operations to buy or sell government securities. These actions manage the supply of money in the banking system to keep the effective federal funds rate within the target range set by the FOMC.
Banks borrow money at Fed Rates to meet liquidity requirements or to finance industrial efforts when they do not have sufficient immediate deposits. This interbank borrowing allows institutions to quickly raise funds to cover net cash outflows or support lending activities.
Fed Rates are target interest rates set by the FOMC to implement U.S. monetary policy, whereas LIBOR was based on a questionnaire where banks estimated their own borrowing costs. Unlike the federal funds rate, which is managed through the Federal Reserve's trading desk, LIBOR was not fixed beforehand and was not intended to have macroeconomic ramifications.