Inflation Surges to 2023 Highs. Will Fed Chair Warsh Defy Trump on Rates?

Inflation Surges to 2023 Highs. Will Fed Chair Warsh Defy Trump on Rates? Rich Duprey Thu, June 25, 2026 at 8:35 PM GMT+7 5 min read CL=F Quick Read PCE inflation hit 4.1% in May, which is more than double the Fed's 2% target, making the case for rate cuts nearly impossible. Warsh signaled restoring Fed credibility takes priority over Trump's push for lower rates, driving rate-hike odds to 54%. WTI crude tumbling below $70 could filter through supply chains and give the Fed cover to hold rates steady in July. Don't wait: the analyst who called NVIDIA in 2010 just revealed his top 10 AI stocks. See the full list FREE now. For much of the past year, investors have focused on one question: when will interest rates come down? President Trump has made no secret of where he stands. He has repeatedly criticized the Federal Reserve for keeping rates too high and argued that lower borrowing costs are needed to support economic growth. His decision to nominate Kevin Warsh as Federal Reserve chair was widely viewed as a move toward a more accommodative central bank. Yet inflation has a way of rewriting the script. Fresh data from the Bureau of Economic Analysis (BEA) suggests the Fed's inflation fight is far from over, setting up a potentially uncomfortable clash between the White House and the nation's top central banker. The BEA reported that the Personal Consumption Expenditures (PCE) Price Index rose to 4.1% in May, the highest reading since April 2023 and more than double the Federal Reserve's 2% target. That alone would be enough to grab investors' attention. But the Fed's preferred inflation gauge -- core PCE, which excludes volatile food and energy prices -- also moved higher, reaching 3.4%, its highest level since October 2023. The numbers present a clear challenge for policymakers. Inflation is accelerating, not slowing. Don't wait: the analyst who called NVIDIA in 2010 just revealed his top 10 AI stocks. See the full list FREE now. That matters because the Fed's dual mandate requires it to pursue both stable prices and maximum employment. With inflation running more than twice its target, the argument for rate cuts becomes increasingly difficult to make. When Trump selected Warsh to lead the Federal Reserve, many observers assumed he would quickly align monetary policy with the administration's preference for lower rates. Surprisingly, Warsh's comments since taking office have suggested otherwise. During his Senate confirmation testimony and following last week's Federal Open Market Committee meeting, Warsh emphasized the importance of restoring the Fed's credibility after inflation remained above target for years. That language echoes former Fed chairs who prioritized inflation control over short-term political considerations. Markets are beginning to notice. According to betting markets, traders now see a 54% probability of a rate hike before year-end, or nearly double the 28% who thought so just one week ago. In other words, investors have gone from debating rate cuts to pricing in the possibility of higher rates. To put that in context, a central bank considering rate hikes is not a central bank preparing to stimulate the economy. That could create tension with Trump, who has consistently argued that lower rates would boost growth, investment, and consumer spending. Inflation just rewrote the script, turning a promised rate cut into a high-stakes collision between the White House and the Fed. © 24/7 Wall St. The wildcard remains energy prices. Inflation reignited in part following disruptions associated with the administration's conflict with Iran, which initially pushed oil prices sharply higher. Energy costs ripple through the economy, affecting everything from transportation and manufacturing to food distribution. Yet oil markets have recently moved in the opposite direction. West Texas Intermediate (WTI) crude -- the benchmark most relevant to U.S. energy pricing because it reflects domestically traded crude oil -- recently tumbled below $70 per barrel. That decline is important even though core PCE excludes energy costs. Lower fuel prices reduce costs throughout supply chains, and those savings often take time to appear in inflation reports. If oil remains near current levels, the Fed may gain valuable breathing room over the next several months. That said, policymakers will want evidence that inflation is cooling before changing course. May's inflation report complicates the outlook for both investors and policymakers. A 4.1% PCE inflation rate and 3.4% core PCE reading leave little room for immediate rate cuts and have pushed market expectations toward the possibility of rate hikes instead. The bigger story, however, may be the relationship between Trump and Warsh. While many expected the new Fed chair to champion aggressive rate cuts, his recent comments suggest preserving the Fed' credibility may take priority. If inflation remains elevated, that could put him on a collisi

Inflation Surges to 2023 Highs. Will Fed Chair Warsh Defy Trump on Rates?

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