Investors, Fed watchers want one thing from Kevin Warsh in his Jackson Hole debut: Clarity

The stage is set for Federal Reserve Chairman Kevin Warsh's first Jackson Hole speech on Friday, offering the new head a chance to clarify the central bank's strategy to bring down inflation and rebuild confidence in the Fed itself.

This year's gathering takes place against a challenging backdrop as inflation remains well above the Fed's 2% goal for the sixth consecutive year after a series of shocks. The latest inflation data offers conflicting evidence , fueling arguments for both patient policymakers who favor holding rates steady and hawks who want to hike rates as soon as possible.

Officials are deeply divided on whether to hold rates steady for now to see if inflation will come down on its own, or to act immediately. This internal tension — the "good family fight" that Warsh desires — resulted in three dissents at the last policy meeting.

The gathering also comes amid a distinct lack of clarity about the Fed's willingness to raise rates. During his July press conference, Warsh repeatedly pointed to bond yields shooting materially higher, suggesting it was a good thing and implying that the Fed welcomes higher yields to tighten policy through markets. His stance initially triggered higher long-term bond yields and ultimately led to confusion and damaged market confidence in the Fed's strategy.

"I would like to hear him explain and start with, 'Here's why we made the decision we made in July,'" Robert Kaplan, former head of the Dallas Fed, told Yahoo Finance.

Kaplan said the Fed chairman doesn't need to predict the future or offer forward guidance. Rather, he needs to "be a faithful reporter of how the committee is working, as opposed to leaving it to people to rely on individual Fed presidents and governors making their own statements.

"I think it would be better if he stepped into that role a little bit more," he continued.

Matt Luzzetti, chief economist for Deutsche Bank, said Warsh's first priority must be a "cleanup" of that July press conference. Luzzetti said unease in the bond markets stems from Warsh's unwillingness to commit to retaining the Personal Consumption Expenditures index as the Fed's favored inflation yardstick, alongside not specifying that rate hikes are the primary method to bring down inflation.

"These ambiguities could be resolved easily at Jackson Hole," Luzzetti said, suggesting either a big-picture talk focused on the Fed's new task forces or a policy-oriented commentary that cleans up recent communication missteps.