Cox Automotive chief economist Jeremy Robb connected the car business to the first major public speech by new Federal Reserve chairman Kevin Warsh last week.

During the annual economic policy symposium sponsored by the Federal Reserve Bank of Kansas City in Jackson Hole, Wyo., Warsh elaborated about inflation, which is impacting dealerships and finance companies. Warsh applauded the work done by policymakers before he was installed.

“Especially in light of recent developments, it is a credit to the Fed as an institution — and consistent with the best of the Fed’s traditions — that market prices show confidence that we will deliver price stability. And I can assure you, they’re right,” Warsh said near the end of his prepared remarks.

“The thing about market measures of inflation expectations in economic history is that they tend to look strong and durable until they don’t. Those expectations are not pushed around easily, and right now they are well anchored. But they must be closely minded. It’s the Fed’s job to make sure that inflation expectations do not get unanchored,” he continued.

“There is one signal nobody can miss: The responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank. And that is where it belongs.” Warsh added.

“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 went on to say.

So, those are the pledges from the Fed and Warsh, who gave his remarks on Friday, marking his 100th day in the chairman role.

Over the weekend, Robb sifted through Warsh’s words and gave his analysis on Monday.

“The Fed funds futures probability of a rate hike at the next meeting jumped from 35% to more than 60% by lunchtime. Markets also priced in a 40% chance of two hikes by the December meeting, up from 15% a day earlier. Warsh was unambiguous on inflation, calling the Fed’s 2% target firm and fixed and noting that progress on underlying inflation has been modest despite better-than-expected recent readings,” Robb wrote in the newest edition of Cox Automotive’s Auto Market Weekly Summary.

“The speech may also help explain why markets moved,” Robb continued. “Warsh pointed to private domestic final purchases, rather than GDP, as perhaps a more reliable measure of the economy. By that measure, growth was revised higher to 4.2% in the second quarter, well above the 1.5% headline GDP figure. He added that it would be difficult to characterize financial conditions as restrictive, a combination that leaves more room for tightening than markets had priced in before the speech.”

Robb then focused on the car business.

“For dealers, the automotive market shows a similar tension. New-vehicle sales held up through mid-August, and used-vehicle activity picked up as Manheim sales conversion rose during the month,” Robb said. “But financing costs are moving unevenly. New-vehicle annual percentage rates rose across nearly every credit tier in August, while used-vehicle rates were flat compared with July. That suggests higher rates had not yet passed through to the used market.

“Consumers, meanwhile, expect more inflation, with the Conference Board’s 12-month measure rising to 5.8% from 5.6% in July, even as July’s income gains provided some near-term relief. Following Friday’s repricing, the financing backdrop heading into fall points to rates remaining higher for longer. Although small rate increases have a limited effect on monthly payments, consumers may react to the higher rates, potentially dampening demand in the coming months,” he went on to say.

Robb also made two other connections to automotive and inflation.

Robb pointed out that transportation services inflation — which includes vehicle maintenance and repair costs, vehicle leasing and public transportation — rose 7.1% year over year in July.

The Cox Automotive economist also mentioned that accessories and parts inflation increased 6.6% year-over-year, representing the highest reading since March.

No matter, Warsh closed his time near one of the most picturesque mountain scenes in the U.S., emphasizing, “I stand here today committed to a discipline, not to a decision.

“My Fed colleagues and I are hardly the first to hold these positions in a time of great consequence. We are determined to redeem the time by doing our very best work,” Warsh said.

“We take our responsibility seriously, with humility and with resolve. So much depends on choices we make. Sound monetary policy helps households and businesses to prosper. When carried out effectively, it broadens and deepens the momentum of our economy, and helps to secure America’s leadership in the world. And I know that our country needs us to think carefully and act wisely,” he went on to say.