Warsh faces bind between Trump, inflation after scorching new report

Federal Reserve Chair Kevin Warsh is facing a major challenge ahead of his first monetary policy meeting leading the central bank on the heels of an alarming May inflation report.

The Federal Open Market Committee (FOMC) is almost certain to keep rates unchanged at the end of its two-day meeting Wednesday, even after the latest inflation data from the Labor Department showed prices rising at the fastest annual rate in more than three years.

But a growing number of economists and policymakers are saying rate hikes could be necessary this year.

Warsh now faces a difficult balancing act as he contends with rising inflationary pressures tied to the war in Iran, an increasingly hawkish Federal Reserve and expectations from President Trump, who has promised for months that his new Fed pick would deliver lower interest rates.

“Warsh is under a lot of pressure, and the conflict in Iran has significantly added to that with the inflation impact,” Stephen Myrow, a former Treasury official and managing partner of Beacon Policy Advisors, told The Hill.

Myrow said the latest inflation report “raises a concern” about the “stickiness, potentially, of the inflation,” adding to doubts that the Fed will be able to lower rates anytime soon.

“We’ve gone from an expectation at the beginning of the year that, by the end of the year, rates would be lower, and now… rate cuts seem to be foreclosed for the time being, and the debate is if and when we’re going to get rate increases,” Myrow said. 

“And this just added fuel to the fire.”

The Consumer Price Index released Wednesday showed prices rising 4.2 percent in May from a year earlier, the third consecutive month with annual inflation showing an increase. In February, before the war in Iran started, consumer prices rose 2.4 percent from a year earlier. The last time inflation topped 4 percent was in April 2023. The latest data came shortly after a May jobs........

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