Federal Reserve chair Kevin Warsh used his first Jackson Hole keynote address to warn that inflation is running too hot for comfort, firming expectations that the central bank could raise rates this autumn, and driving the dollar higher.

In an address that subtly departed from market expectations for continued neutrality, Warsh said “I am impressed by the overall performance of the economy, which appears to have strengthened,” and noted that labour markets remain “quite stable,” but signalled that policy may not yet be restrictive enough given that inflation is still running above target. “While this summer’s PCE (personal consumption expenditures) and CPI (consumer price index) readings were better than expected, they do not tell me that underlying trends have meaningfully improved,” with the Fed’s preferred inflation measure rising 3.7% on a 12-month basis, accelerating to 4.1% in the last six months.

Although the newly-minted chair prefaced his remarks by saying “you can call it an outline… you can call it a trail map… just don’t call it forward guidance,” he made several observations that should help reduce ambiguities surrounding the central bank’s policy framework. “The Fed’s price-stability objective of 2%, as measured by the personal consumption expenditures (PCE) price index, is a firm, fixed target”, he said, noting that “Short-term interest rates are the predominant tool to achieve the dual mandate,” warning “Unconventional policies to spur economic activity may suit genuine crises but should otherwise be used sparingly, if at all”. Perhaps most pointedly, “the Fed’s predominant focus right now should be on prices”.

Ahead of the speech, Warsh had drawn fire from investors for refusing to spell out his “reaction function”—his framework for adjusting policy settings as economic conditions change—and for sowing confusion over how the central bank would implement monetary policy in the future. In his first two press conferences, he—perhaps unintentionally—cast doubt on the central bank’s commitment to the core personal consumption expenditures index as its inflation target, questioned whether interest-rate changes would remain a key policy tool, and hinted markets might carry out policy on the Fed’s behalf.

The dollar is advancing incrementally, policy-sensitive Treasury yields are slightly higher on the front end, and equity indices are declining as traders upgrade the likelihood of a rate hike at one of the Fed’s upcoming meetings. Roughly 35 basis points in tightening are now priced in by the end of December, up from 27 prior to the speech, and policy-sensitive two-year yields are nudging the 4.3% mark, suggesting that markets see Warsh’s comments as more hawkish on the margins.

Data released over the coming weeks could move markets more dramatically as expectations are dialled in. Today’s speech will help lift the fog around the Fed’s reaction function, but considerable uncertainty remains about the state of the economy itself. Against that backdrop, the August payrolls and inflation reports will carry more weight than usual, setting the stage for significant moves in bond, equity, and currency markets around each release.

Warsh will not take questions from attendees or the media after his comments. You can view conference materials here.