Fed Chairman Warsh Testifies After CPI Shows Largest One-Month Drop Since 2020; Odds of July Rate Hold Rise Above 80 Percent

Fed Chairman Kevin Warsh testified before the House Financial Services Committee on Tuesday that the central bank has “no tolerance” for stubbornly high inflation. The Bureau of Labor Statistics released its June Consumer Price Index earlier that morning, showing inflation slowed by its largest one-month drop since 2020. That is not my view,” Warsh said.

Following the testimony and the CPI report, the probability the Fed will hold interest rates at its July 29 meeting rose to more than 83 percent, according to CME FedWatch. The probability of a rate hike at that meeting fell to roughly 16 percent, down from 40 percent. Warsh refused to provide an outlook on the path of interest rates.

He said prices face upward pressure from factors outside the Fed’s control, such as conflicts overseas, but added that “Inflation is a choice” and is largely shaped by monetary policy decisions. “The Fed’s number one objective is to get monetary policy right – or as near to it as we possibly can,” Warsh said. ” Warsh stated the labor market remains broadly stable.

He noted that low prices would support business hiring. Fed Governor Christopher J. Waller said on Monday that several months of lower inflation readings would be needed to confirm the trend.