The first inflation report under new Fed chief Warsh isn't good
Summary
The Federal Reserve released its first inflation report under new chief Kevin Warsh, showing consumer prices rose at their highest rate in nearly three years in April. Inflation increased mainly due to higher energy costs, posing challenges for the Fed as it considers future interest rate decisions.Key Facts
- The personal consumption expenditures (PCE) price index rose 3.8% annually in April, the highest since May 2023.
- Core PCE, which excludes energy and food, increased 3.3% annually in April, matching forecasts.
- Rising energy prices, partly linked to the Iran conflict, are driving higher inflation.
- The Federal Reserve had previously expected to cut interest rates in 2026, but this is now less likely.
- President Trump wants the Fed to lower borrowing costs to support economic growth.
- Inflation increases also appeared in housing, utilities, recreation services, and food services.
- There is now a 40% chance of a Fed interest rate hike in December, up from 3% in June.
- The report suggests inflation pressures remain high despite slightly lower-than-expected price increases in April.
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