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Inflation Reports Could Test Warsh’s Tough Talk
Federal Reserve Chairman Kevin Warsh envisions a central bank whose interest-rate decisions don’t hinge on the latest monthly data. That vision may have to wait.
Two inflation reports over the next month are set to shape whether his colleagues push to raise rates in September or extend their pause.
A cool number in Wednesday’s release of the July consumer-price index would relieve pressure on both Warsh personally and a policy committee weighing whether it has misread the U.S. economy. A firm one could force him to demonstrate with action what he struggled last month to convey in words.
The CPI feeds into the Fed’s preferred inflation gauge, to be published later this month. Economists expect core consumer prices, which exclude food and energy, to have risen 0.2% in July. Monthly readings at or below that level would be consistent with inflation returning to the Fed’s 2% goal. Anything higher would not. Core inflation in the preferred gauge was 3.3% in June, up from 2.8% a year earlier.
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