Inflation eased in June, helping Fed's Warsh delay potential rate hikes
But the renewed hostilities in Iran may undercut the solid consumer price report.
07/14/2026 09:46 AM EDT|Updated: 07/14/2026 01:22 PM EDT
Federal Reserve Chair Kevin Warsh got a reprieve Tuesday when the government reported a steep drop in inflation last month driven by lower gas prices, which will take some of the pressure off the central bank to quickly raise interest rates.
The consumer price index fell 0.4 percent in June, its largest decrease since the depths of the pandemic in April 2020, as falling energy costs offset price increases in other areas like housing and food. Inflation in services industries beyond energy was also flat, an encouraging trend.
But it’s difficult to predict whether this improved picture will hold, particularly since the U.S. has restarted hostilities with Iran, prompting oil prices to once again surge.
“I don’t want to overread or cherry-pick data,” Warsh said in testimony to the House Financial Services Committee on Tuesday when asked about the numbers. “There might be some that look at this morning’s data and say, ‘Oh, mission accomplished. Everything is swell.’ That is not my view.”
President Donald Trump has vowed to take control of the Strait of Hormuz by resuming military strikes and renewing a blockade on traffic through the vital waterway. That threatens to further extend the nearly five-month war, which stoked inflation by spiking energy prices.
Those price increases started to ease last month after tensions relaxed and the U.S. and Iran agreed to a ceasefire.
CPI increased 3.5 percent in June over the last 12 months, a decline from the 4.2 percent annual rate reported in May, according to the latest data. But inflation, as Warsh noted in his testimony, has been above the central bank’s 2 percent target for 63 months.
The Fed chair has made it a habit in his early tenure to avoid commenting on the outlook for the economy and interest rates, but he reaffirmed his commitment to getting inflation back down. Warsh acknowledged that the Fed had tolerated inflation above its goal but said he and his colleagues were committed to bringing it down.
“Inflation is a choice,” he said. “This isn’t a time for us to pass the buck, to blame others. The Federal Reserve can and will deliver price stability.”
Still, he didn’t explicitly mention the prospect of rate hikes and also referenced a desire to see more corners of the economy benefit from growth, which could be stifled by higher borrowing costs.
“We want economic growth to be more broad-based, and we want the change in prices, the increase in inflation, to be more limited,” he said.
Fed officials are eyeing the possibility of rate hikes later this year if inflation does not continue to ease, according to the minutes from their June meeting. Fed board member Christopher Waller suggested on Monday that he might consider increasing rates as soon as this month if the inflation data came in hot, but Tuesday’s better-than-expected news should help keep the Fed on hold for the time being.
Over the longer term, Warsh underscored his commitment to reforming how the institution conducts policy, a goal that has led him to form multiple task forces led by external advisers.
The process has led to a “sea change in new thinking” during his first month and a half on the job, he said.
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