JACKSON HOLE, Wyoming: Federal Reserve Chairman Kevin Warsh said August 28 that policymakers must see clear progress toward their two percent inflation target or the U.S. central bank will "have work to do," signaling that interest rate increases could be needed if price pressures persist.

"Here is my standard: We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That's our job ... our mandate ... and our charge to keep," Warsh said in the keynote speech at the Fed's Jackson Hole economic symposium in Wyoming.

Markets raised bets on a rate hike next month following the remarks, while the audience of global central bankers applauded Warsh's comments.

"We're moving up on six years where we've been above target" on inflation, former Philadelphia Fed President Patrick Harker said. "You can't keep saying this is our job" and then not act, he added. "As the old saying goes, actions speak way louder than words."

Warsh said "short-term interest rates are the predominant tool to achieve the dual mandate," while stressing that recommendations from five task forces he commissioned to study longer-term issues would not affect current policy decisions.

Those recommendations "will come later and have no bearing on decisions we make in the current policy conjuncture. But I believe that for future policy challenges, this intellectual investment today will leave us far better prepared," he said.

Warsh said the Fed "needs clear market signals, as unfiltered as possible," to set appropriate monetary policy.

On inflation, he said, "progress over the past two years has been modest." The Fed's preferred Personal Consumption Expenditures Price Index was running at 3.7 percent annually in July.

Recent figures "do not tell me that underlying trends have meaningfully improved," Warsh said. About half of the items in the PCE basket were rising at an annual rate above three percent.

Capital Economics analysts said the speech "delivered a far clearer and hawkish message than his last press conference appearance."

"That leaves the door open to a hike earlier than our current forecast of December, if the forthcoming price data are firm."

Rate futures put the probability of a hike at the Fed's meeting on September 15 and 16 at about 55 percent, compared with about 40 percent before Warsh spoke.

Warsh did not give a timeline for rate increases and said his comments should not be interpreted as "forward guidance."

"Inflation is running above our two percent target," he said, describing the target as "firm" and "fixed."

"The Fed's predominant focus right now should be on prices," Warsh said.

He said inflation expectations currently appear anchored but must be "closely-minded."

"It's the Fed's job to make sure that inflation expectations do not get unanchored," he said.

Warsh also said "credit and loan markets are showing few signs of policy restraint," with the Fed's policy rate unchanged at 3.50 percent-3.75 percent since December.

Three policymakers dissented from the Fed's decision to leave rates unchanged in July, favoring tighter policy. August unemployment, job growth, and consumer inflation figures are due early next month.