Warsh Won't Call Inflation Fight Over, Even as June CPI Drops Most Since 2020

Since the Bureau of Labor Statistics reported Tuesday, July 14, that consumer prices fell a seasonally adjusted 0.4% in June, the biggest one-month drop since April 2020, the fight over what that number actually means has moved from the data itself to the Fed's own leadership.

Fed Chairman Kevin Warsh spent Tuesday testifying before the House Financial Services Committee and Wednesday before the Senate Banking Committee, and he gave the same answer both times: don't get excited yet.

"I'm not going to show up here and say mission accomplished," Warsh told the House panel, according to CFO Dive. "There's plenty of work to do." He repeated a version of that line to CNBC coverage of his Wednesday Senate appearance, again declining to signal where rates go next.

The annual inflation rate now sits at 3.5%, down from the previous month but still well above the Fed's 2% target, according to CBS News. That target has been elusive for five years, according to Fox Business, and Warsh told the House committee the Fed's rate-setting Federal Open Market Committee has "no tolerance for persistently elevated inflation" and a "resolute commitment to restoring price stability."

Williams says the peak has passed

A day after Warsh's House testimony, New York Fed President John Williams offered a more optimistic read in a speech to business leaders in his district, according to CNBC. Williams laid out five reasons he believes the latest inflation surge has run its course: tariff effects should stop compounding since expiring duties are simply being replaced by new ones, oil prices have "likely peaked" and should fall back toward pre-war levels, AI-driven investment imbalances should ease as supply comes online, the labor market isn't adding inflationary pressure, and inflation expectations remain "well-anchored."

Williams forecast inflation falling to around 3.25% by year-end, then gliding down toward 2% in 2027 and hitting target in 2028. "The current stance of monetary policy is well positioned" to get there without further hikes, he said.

That's notably more dovish than his boss. Warsh, testifying the day before, wouldn't rule out further tightening and pointedly avoided cherry-picking one good month of data as proof the job is done.

The oil problem nobody's ignoring

Inflation spiked earlier this year after the U.S. and Israel struck Iran in late February, sending oil prices higher, according to CNBC. Since June 30, Brent crude futures have jumped roughly 17%, from $72 a barrel to $85, following the collapse of a ceasefire in the Iran war. That's a real risk to the disinflation story Williams is telling, and it's a fair reason for Warsh to hedge rather than declare victory.

Markets, meanwhile, have moved fast. CME Group's FedWatch tool showed an 86% probability of the Fed holding rates steady at its next meeting, according to CBS News, down sharply from odds that priced in a possible hike just days before the CPI report. Futures traders cut the odds of a rate hike this month from 41.7% on Monday to 16.6% after Tuesday's data, according to CFO Dive.

The White House wants cuts, now

National Economic Council Director Kevin Hassett didn't