Warsh Makes First Congressional Appearance as Fed Chair, Signals Independent Path
By Tom LoBianco | Quincy News Correspondent
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Washington (Quincy News) — Federal Reserve Chair Kevin Warsh gave few hints during two days of congressional testimony on whether or when the Fed may raise interest rates, but back-to-back reports released this week showed inflation dropping in June, giving the central bank new breathing room.
June’s Consumer Price Index (CPI) and Producer Price Index (PPI) pointed to sharp drops in inflation as gas prices fell during a temporary ceasefire that eased tensions around the Strait of Hormuz. But that easing could be temporary, as hostilities, and subsequent oil price hikes, resumed this month.
Over two days of testimony before Congress, Warsh offered few clues about the future path of interest rates while reaffirming the Fed’s commitment to returning inflation to its longstanding 2% target.
Tuesday and Wednesday marked Warsh’s first return to Congress since his Senate confirmation, which coincided with the Trump administration’s investigation of former Fed Chair Jerome Powell and its unsuccessful effort to remove Fed Governor Lisa Cook over allegations of mortgage fraud.
While the state of the economy and the Fed’s next policy moves dominated much of the week’s hearings, lawmakers also pressed Warsh on whether he would stand his ground if President Trump pushed for interest rate cuts. Warsh did not directly mention Trump but promised to maintain the central bank’s independence.
“We’re honored to be independent,” Warsh said Tuesday. “My commitment to you is to follow the law and follow the data.”
The Supreme Court reinforced the Federal Reserve’s independence last month, narrowly ruling that the president cannot arbitrarily end a Fed governor’s term without following the proper process.
Warsh testified shortly after the release of June’s CPI, which showed an easing with a drop in gas prices amid a tentative ceasefire in Iran.
The CPI fell 0.4% in June, the largest monthly decline since April 2020, lowering the annual inflation rate from 4.2% to 3.5%. But “core CPI,” which excludes energy and food prices, stayed steady last month and rose 2.6% from a year earlier.
The PPI, released Wednesday, showed the sharpest one-month drop since April 2025, down 0.3% last month, as well as a downward revision in May’s PPI number. Similar slowdowns in job growth for June and May added to the tempered optimism.
But June’s relief could prove short-lived as renewed hostilities between the U.S. and Iran have pushed oil prices higher again, raising the risk that inflation will accelerate in July.
“Most of this relief in the CPI was basically because of the gas prices – most of that has already been erased,” said David Mitchell, professor of economics and director of the Bureau of Economic Research at Missouri State University.
“Once again, I think the rates should have gone up a long time ago,” Mitchell told Quincy News, arguing that the pain of bringing inflation down from 4% to 2% is far less than the long-term cost of reducing inflation once it reaches 6% or higher.
Pressure for a rate increase has been building within the Federal Open Market Committee following three consecutive rate cuts at the end of 2025. Typically, new Fed chairs are given a honeymoon period after taking office, but minutes from the committee’s June meeting revealed that a few participants already saw a case for raising rates, while others anticipated higher rates later this year.
“Inflation is wiping out wage gains for many. Grocery prices also continue to rise,” wrote Heather Long, chief economist for Navy Federal Credit Union, on X.com. “But the picture did look slightly better in June than in April or May. The decline in gas prices, along with declines in electricity, apparel and medical care help.”
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