Kevin Warsh Gets Breathing Room as June Inflation Cools Before Fed Rate Meeting
Kevin Warsh got the inflation report every new Federal Reserve chair wants, but not the one that lets him relax.
The Bureau of Labor Statistics said Tuesday that consumer prices fell 0.4 percent in June after rising 0.5 percent in May. It was the largest one month decline since April 2020. Annual inflation cooled to 3.5 percent from 4.2 percent, while core inflation, which excludes food and energy, slowed to 2.6 percent from 2.9 percent.
That gives Warsh and the Fed breathing room before the July 28 and 29 policy meeting. A hotter report would have strengthened the case for another rate hike. Instead, softer core inflation and cheaper gasoline make it easier for policymakers to hold rates steady while they wait for more data.
The relief may be fragile. BLS said energy prices fell 5.7 percent in June and gasoline dropped 9.7 percent, making energy the biggest driver of the monthly decline. Reuters reported that renewed Middle East conflict has already pushed gasoline and oil risks back into the inflation outlook, leaving markets unwilling to fully dismiss a rate hike later this year.
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Warsh also kept his message cautious. AP reported that he told lawmakers the Fed has no tolerance for persistently elevated inflation and said the June report did not amount to mission accomplished.
The public reaction reflected that split. Fox News indexed the CPI drop on X as the biggest one month decline since 2020, while market accounts highlighted flat core CPI. On Reddit, users questioned whether claims of reduced political pressure on Warsh were supported by direct statements.
For consumers, the key issue is whether June was a turn or a pause. If energy prices rebound, the Fed’s rate debate could quickly tighten again.
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