The Federal Reserve is far from declaring "mission accomplished" in the fight to lower inflation, but for most of the central bank's policymakers, cooler price-growth readings this past week have reduced the pressure to raise interest rates.
New chairman Kevin Warsh appeared before Congress for two days this past week, spending more than five hours answering a barrage of questions from lawmakers. The message he delivered over the two days was clear and resolute: The Fed will deliver price stability. He didn't flinch from taking on responsibility, calling high inflation a "choice" -- and one that needed to be addressed. But he stopped short at delivering any analysis on whether the Fed would need to raise interest rates to accomplish this goal.
Warsh's Fed, while talking a big game on bringing down inflation, seems to be heading toward the same policy stasis that plagued much of Jerome Powell's tenure as chair. Markets are still pricing in an interest-rate hike this year, but most of the eight voting members of the Federal Open Market Committee who spoke this week signaled they weren't rushing to raise rates to combat persistent inflation, which has remained above the Fed's 2% target for 63 months.
Policymakers didn't take much comfort in this past week's cooler print from the consumer price index. A significant drop in gasoline prices helped consumer inflation pull back to 3.5% year over year in June, a steeper-than-expected drop from May's 4.2% pace. Even when excluding the more volatile effects of food and energy prices, core inflation dipped to 2.6% from May's 2.9% rate. The producer price index similarly declined in June due to the decline in prices at the pump, though core wholesale inflation still gained last month.
"There might be some that look at this morning's data and say, 'Oh, mission accomplished. Everything is swell.' That is not my view," Warsh told lawmakers on Tuesday.
Chicago Fed President Austen Goolsbee and New York Fed President John Williams -- the latter a voting member of the Federal Open Market Committee -- echoed similar sentiments this past week. "One month is no months. You never want to overreact to one month. If we got several months like this, I'd be feeling better," Goolsbee noted.
But the tone from both leaned more toward cautious waiting, rather than a strong push for higher rates in the near term. Williams, for example, said June's results were consistent with what he is hoping to see over the coming months.
Fed governer Christopher Waller said that after the escalation in recent months, he needed to see "several months" of lower readings to feel that inflation is moving in the right direction. That seems to keep him on hold in the near-term. Fed governer Lisa Cook noted on Wednesday that if there are no signs of disinflation "soon," she is prepared to act.
Dallas Fed President Lori Logan, a voting FOMC member, was perhaps the lone policymaker who still came out strongly in support of a rate hike, saying Thursday she believes that "modestly" higher interest rates are needed. Without policy intervention, inflation appears to be heading toward the mid-2% range -- not all the way back to 2%, she said.
The straw count, as of now, among voting members of the FOMC who have weighed in this past week suggests that they will hold rates steady at the July 28-29 policy meeting.
The following FOMC meeting isn't until September -- and a lot can change between now and then, especially given the re-escalation of hostilities with Iran. But it seems like it will prove difficult to pry policymakers from their holding pattern.
Write to Megan Leonhardt at megan.leonhardt@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 17, 2026 12:54 ET (16:54 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments